AML crackdown?

On 20 March 2019, the SRA announced that it will call in the firm-wide risk assessments of a sample of 400 firms.

They will seek to assess the quality of these risk assessments and determine whether there are sector-wide issues that the SRA need to tackle.

The possibility of disciplinary action is mentioned where firms are found to be failing to comply with the Money Laundering Regulations 2017 (the Regulations).

Risk assessments

The firm-wide risk assessment is a relatively new requirement, not present in the earlier, 2007, iteration of the Regulations.

Last year’s thematic review by the SRA, commenced shortly after the Regulations came into force, commented on the somewhat low levels of compliance with the requirement.

With the requirement being relatively recent at the time, there was arguably some room for leniency in late 2017 and early 2018.

The SRA is clearly no longer taking the same view. The pressure is on for members of the profession undertaking work covered by the Regulations to put in place a good quality firm-wide risk assessment.

But the pressure is also on for regulators and supervisors to ensure high levels of compliance with the Regulations by those who fall within their scope.

More supervision?

Last year’s review of the UK’s AML regime by the Financial Action Task Force (FATF) concluded that, while the AML regime was overall of a very high quality, there was room for improving how supervision of the professions (namely accountants and lawyers) worked in the UK.

The year-old supervisor of AML supervisors - the Office for Professional Body of AML Supervision (OPBAS) - elaborated on these conclusions in March by listing the outcomes from their 2018 supervisory visits to the 22 professional body supervisors (PBS), including the Law Society, named in the Regulations.

A key focus for OPBAS in its March report is on enforcement of compliance with the Regulations - a function which the Law Society has delegated to the SRA as the regulator of the profession.

OPBAS state that they ‘made findings relating to enforcement for 82% of relevant PBSs’.

While we can only speculate as to the tone and content of these findings, we can guess that OPBAS would like to see more supervisors ‘be ready and able to take appropriate action where members have failed to meet their obligations’ as per the OPBAS sourcebook.

While OPBAS has no direct relationship with solicitors, their findings will play a role in shaping how legal sector supervisors support their populations and regulate them.

The government view

In addition to OPBAS’s recent disclosure of its findings, the government launched a process in January that will shape a new cross-sectoral public-private plan to assess the economic crime threat and tackle it.

The plan will seek to improve the UK’s AML regime by updating the system for reporting and processing SARs and further developing structures for information and intelligence sharing both across and between the public and private sectors.

The plan is a welcome and collaborative development in our common battle against the ‘hundreds of billions’ that the NCA estimate are laundered through the UK every year.

Another strand of the plan to tackle economic crime focuses on the quality of AML supervision by public sector (Gambling Commission, HMRC and FCA) as well as professional body supervisors in the UK, highlighting the government’s commitment to improving the overall standard of AML supervision in light of the recent findings by FATF.

What should you be doing?

This is not to say that anyone should be scared. The UK’s AML regime is risk-based.

No one expects solicitors carrying out work covered by the Regulations to implement risk-mitigation processes that go beyond the risk-profile of their practice.

But step one must be to assess this risk-profile through the firm-wide risk assessment.

Assess, note down and regularly review how you do what you do, and who you do it for, namely your clients, delivery channels, types of activity you perform etc as part of your risk assessment.

This will help you identify and question the clients and matters that may fall outside the usual and therefore trigger suspicion.

Getting help

If you are struggling with the risk assessment, the Law Society offers substantial supportive resources to help you.

An initial source of valuable information is the AML guidance for the legal sector.

If this doesn’t answer your question, call the free and confidential AML Helpline. The team of solicitors working for the helpline (part of the wider Practice Advice Service) will either answer your question or direct you further to yet more sources of support.

You can also email us for bespoke advice at riskandcompliance@lawsociety.org.uk.