It was reported in the Law Society Gazette of the 24th June that the Solicitors Regulation Authority (SRA) will need to pay the £189,000 costs in an unsuccessful regulatory claim that international firm Dentons had been in breach of its regulatory requirements in 2013-2017, and so before the time that the current Money Laundering Regulations came into effect. This follows hard on the heels of a similar claim brought against major shipping firm Clyde & Co who were found to have failed in their duty to undertake ongoing monitoring on a major shipping client after having taken them on as a client in 2014. In that case the SRA succeeded in their claim that the firm had failed in its responsibilities between 2014-2018.
The linking point in both reports – one successful from the SRA’s point of view but the other unsuccessful – is that both could be seen to be historic claims. Both date back to a time when the regulator was not monitoring the issue of AML non-compliances as actively as it does now and was much slower to find regulatory fault.
This should and will be a cause of concern to all solicitors. The reality is that the payers of the substantial costs award in the Dentons case will be all practising solicitors, since the SRA has no funding other than its share of the annual practising certificate revenue which all solicitors pay. Either the contribution will need to go up or the SRA will need to find savings to subsidise it, which could also impact upon the support given to firms.
Concerning as these AML Compliance awards against such major firms are, equally worrying are the smaller but often damaging awards made against smaller commercial and high street firms. Most of the recently reported awards tend to be pitched slightly below the SRA’s £25,000 fining limit so that they can be imposed without being referred to the Solicitors Disciplinary Tribunal (SDT). It could be said that this is a cynical use of the fining powers since any firm finding itself to be the unwelcome recipient of such a fine is unlikely to throw good money after bad by mounting an appeal.
Many of the findings by the SRA are in relation to firms that, although compliant now, were not in for the first few years of the Money Laundering Regulations. One has to ask what, other than punishment, is to be achieved from fining those that may have neglected responsibilities in the past but have since put their house in order and implemented appropriate safeguards? Typical of this was the announcement by the SRA that a small three partner firm in the Southwest had been fined £23,000 plus costs of £1,350 earlier this year for failing to undertake matter opening risk assessments prior to March 2023. In their announcement, the SRA stated that they had deemed the matter likely to “cause serious harm to the public interest and to public confidence in the legal profession”. It has to be said that this is probably highly unlikely and that given what is going on elsewhere in the world, the public might well have had different concerns that were more pressing to them at the time.
So can we expect a reduction in AML Compliance pressures in the near future? Sadly it would seem not. In late June, and just a few days before the general election, David Lammy announced that a Labour Government would make professional enablers the target of a major attack on dirty money passing through the London market in particular. Stressing his own credentials as a lawyer which meant that he knew that almost all professionals do conduct themselves as they should he nonetheless expressed regret that notwithstanding the available evidence no firms had been convicted of breaches of the Money Laundering Regulations.
At the risk of what might seem little more than a quibble, one solicitor in the Northwest was in fact convicted of a breach of the MLR in the context of a successful prosecution under the Proceeds of Crime Act in 2018, but more importantly the substantial numbers of the disciplinary proceedings as above should surely have also been taken into account in his assessment of the current enforcement regime.
Whilst we would not begin to suggest that the fight against money laundering and organised crime is not an entirely righteous one, we do think that there should be a sense of proportion in AML Compliance fines. Where a firm has made efforts to improve its AML processes and no actual harm has been occasioned in the past, then surely the imposition of swingeing fines cannot be justified from any commonsense perspective. By all means penalise those that make no attempt to improve or are blasé in their attitudes to regulation. However, fines that do not reflect an ongoing threat and are imposed for procedural oversights, will do little to stem the tide of money laundering. Stop going for the soft targets and low hanging fruit – go instead for the blatant, the idle and the patently criminal.
Against this rather worrying backdrop of AML Compliance Infolegal regularly updates its AML training and advice and has just launched updated training recordings to its members. We are committed to updating our AML presentations at least annually as the SRA have made it clear that the training in this topic must be undertaken on an ongoing basis, and we have been made aware that at least one of the PII brokers will seek evidence that this training topic has been updated annually.
The most recently updated courses, which are included at no additional cost to its members, deal with Financial Crime aspects of Tax Evasion, Client Care, the Statutory Offences of Money Laundering in the Proceeds of Crime Act 2002 for Fee Earners, and Money Laundering Compliance for Support Staff. They represent merely some of the regulatory training courses on offer which include topics such as Cybersecurity, Data Protection, Mortgage Fraud, Conflict and Confidentiality, Bribery, Equality and Diversity, and Financial Services, to name but a few.