A Third of Inspected Law Firms Break UK’s AML Rules

A third of inspected law firms in England and Wales are breaching anti-money laundering (AML) requirements, according to a report on new figures from the Solicitors Regulation Authority (SRA).

The watchdog said fines totaling £1.5 million were imposed amid widespread failings in firms’ systems for detecting and reporting suspicious activity, The Times reported.

Under the Money Laundering Regulations 2017, law firms must maintain procedures to prevent client accounts being used to wash illicit funds and conduct robust due diligence on civil law clients. Of the 9,149 firms in England and Wales as of early April, 5,569 fall within the scope of those rules, the SRA said.

The most frequent breaches involved firms failing to perform risk assessments of clients or of specific instructions. The next most common lapse was inadequate checks on clients’ sources of funds, according to the report.

The SRA also cited a July Treasury assessment that confirmed the legal sector’s “high-risk” profile for money laundering and terrorist financing.

SRA chief executive Paul Philip said the regulator is “making increasing use of data to monitor how law firms manage the risk of money laundering,” describing an evidence-led approach built on trends across thousands of files and firms, The Times said.

He expressed disappointment at the government’s decision to strip the SRA of responsibility for monitoring AML compliance and transfer that role to the Financial Conduct Authority, noting the SRA had “made significant progress in recent years,” according to the newspaper.