SRA: New power will help it meet obligations
The Solicitors Regulation Authority (SRA) expects to use its proposed new power to demand information from solicitors about economic crime several hundred times a year, it has emerged.
The power has been added to the Economic Crime and Corporate Transparency Bill currently going through Parliament.
An impact assessment published by the Ministry of Justice (MoJ) yesterday said the regulator expected to use it around 750 times a year.
At the moment, the SRA has the power to require firms to provide it with certain documents ahead of inspections it carries out in relation to money laundering. It used this 1,537 times in 2021/22 and 1,229 times in 2020/21, according to the MoJ.
However, approximately 3,200 law firms and sole practitioners are not covered by the Money Laundering Regulations, and it does not apply to economic crime more broadly.
The only other way the SRA can force firms to hand over information and documents is by issuing a notice under section 44B of the Solicitors Act 1974. But this is only used where necessary for the purposes of an investigation, rather than a routine inspection, even if the firm has been targeted on a risk basis.
The bill is also introducing a new regulatory objective requiring all the legal regulators to promote the prevention and detection of economic crime as a distinct priority.
The MoJ said: “The risks of economic crime are not restricted to money laundering, with fraud and breaches of sanctions regulations also posing significant risk.
“The SRA is also at risk of its members questioning its powers in this space, with time and resource implications which may limit the SRA’s targeted compliance activity in relation to economic crime.”
The MoJ said government intervention was “necessary” to ensure the SRA could fulfil “its obligations to effectively oversee and enforce the prevention and detection of economic crime”.
The power would also “support” the new regulatory objective, which itself “provides a clear basis upon which the Legal Services Board can assess how effectively the legal services regulators uphold the economic crime regime”.
The MoJ said the SRA estimated it would, in steady state, make around an additional 750 information requests a year after a two-year transitional period during which it would use the power to carry out small-scale thematic reviews “to build the evidence based and to identify emerging areas of risk”.
“This figure is around half the number of anti-money laundering (AML) requests the SRA completes as it will continue to use its existing powers for AML work, and the SRA’s assumption is that risk is lower in other areas of economic crime.”
The MoJ estimated that the extra time spent across the profession in handling these requests would amount to £225,000 a year, based on a staff cost of £50 per hour.
“We anticipate this measure will help the SRA identify and investigate breaches of the economic crime regime and will act as a deterrent to those who might otherwise commit such offences.
“As such, the measure is also likely to help preserve public trust in the legal services sector and therefore the attractiveness of the jurisdiction, which may also positively increase practitioners’ turnover.”
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