Sanctions: Two firms reported
The Solicitors Regulation Authority (SRA) has reported two law firms to the Office of Financial Sanctions Implementation (OFSI), part of the Treasury, for breaching sanctions on Russia.
The law firms in both cases were allegedly facilitating transactions worth more than £300,000.
In her sixth annual report as the SRA’s money laundering reporting officer, presented at this month’s meeting of its main board, Sara Gwilliam said she had assumed responsibility for reporting any known or suspected sanctions breaches to OFSI. No further details of the alleged breaches were given.
The SRA wrote in January this year to over 1,000 law firms outside the scope of the money laundering regulations, which admitted not having basic controls in place to mitigate the risk of sanctions breaches. All law firms must comply with the sanctions regime.
City lawyers complained last summer that the latest tightening up of the Russian sanctions regime for legal services, which came into force in June 2023, had gone too far and would “weaken, rather than strengthen” the UK’s sanctions regime.
Elsewhere in her report, Ms Gwilliam said that conveyancing remained “by far the highest risk area for illicit finance and money laundering in our reports”.
As result of 36 internal reports, she submitted 23 suspicious activity reports (SARs) to the National Crime Agency from April 2023 to April 2024, involving more than £75m in suspect transactions or arrangements involving the legal profession – a similar figure to last year.
Three-quarters of the SARs submitted involved conveyancing work, the majority of which was residential rather than commercial.
Nearly two-thirds of the SARs related to activities carried out at small firms (defined as firms with no more than 10 fee-earners), a little lower than last year.
Ms Gwilliam said that other aspects featuring in the reports concerned transactions where no underlying legal work was carried out, leaving firms vulnerable to facilitating money laundering through misuse of their client account.
“Also, firms transacting proceeds from insurance frauds, such as motor vehicle and personal injury were seen.
“Additionally, this year also saw us make our first SAR linked to proliferation financing involving the trading of large quantities of high-value dual-use goods.” Proliferation financing refers to providing funds or services related to weapons of mass destruction.
Ms Gwilliam said firms “not conducting any or sufficient due diligence and source of funding checks on their clients, or third parties, was a key theme in many of the cases we reported”.
In other cases, law firms did not “properly scrutinise the information they were in receipt of which should have triggered concerns about the legitimacy of the funds or instruction they were involved with”.
Ms Gwilliam said that, in a small number of cases, “firms did identify money laundering red flags and formed a suspicion but failed to make a SAR” themselves.
In addition to the SARs, she said that 410 matters cases which carried potential money laundering, terrorist financing or sanctions-related risks were flagged – a rise from 359 last year.
“This early warning system meant any cases assessed as posing a specific financial crime risk could be monitored to track follow-up investigations.”
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