The most pressing law firm compliance issue to report on this month is once again AML compliance. The issue of what is expected of those firms that are subject to the Money Laundering Regulations 2017 continues to be highlighted by regular news items in the legal press of firms having been fined for failures to meet their professional and regulatory responsibilities. The issue of AML compliance also dominated much of the day at the recent SRA COLPs and COFAs conference in Birmingham as those who are due to attend the virtual event planned for the start of next week will also find.
We have seen in just the last few weeks news of an Exeter firm that was fined £12,152 by way of an agreed settlement for not having been able to produce a valid risk assessment for previous years, despite everything required now being in place. Meanwhile a Gazette report from the week before reported that “firms from Oldham, Surrey, London, Wolverhampton and Birmingham have all been sanctioned”. The most notable of these was the Oldham firm that was fined £24,123 for again having failed to be able to show a documented risk assessment as required by r.18 MLR 2017 between the years of 2017 and 2023. This theme was repeated in the case of the Surrey firm that was also included in the report, they also for not having had a compliant risk assessment in place over the same period of time.
Many are bound to question quite what is being achieved by these findings. The Gazette report on the Surrey firm states that although there had been the potential to cause harm there was in fact no evidence of this having been the case in relation to any consumer. Many are also likely to question the fairness of these penalty awards given that the SRA was not monitoring or enforcing the relevant provisions in the MLR 2017 anything like as actively then as has now become the case. From the regulator’s point of view it therefore seems to be a case of “heads we win, tails you lose”.
On a wider scale there was evident disquiet at the COLPs and COFAs conference at the confident assertion by Paul Philip, chief executive of the SRA, and chair Anna Bradley that there was no need to apologise to the profession for the substantial increase in practising certificate costs to cover the multi-million pounds losses arising from the collapse of Axiom Ince earlier this year. It was apparently a “historical” item that did not need reopening or addressing, unlike of course the historical failings by law firms where clearly the SRA are willing to reopen and address issues even where no harm has resulted. Clearly a case of one law for the SRA and another for those whom it regulates.
It has been admitted that in retrospect the SRA might have “done things differently” and the Legal Services Board used its statutory powers to issue directions to the SRA to avoid such a situation in the future. Nonetheless, this particular issue is now closed so far as the regulator is concerned which just leaves the profession to pick up the tab for the losses.
None of the above makes for happy reading but a wry smile might be in order in seeing one of the issues contained in the latest SRA Update 133 issued earlier this month – “Your Health, Your Career”. As the explanatory text acknowledges “life as a solicitor can be challenging and the pressures can easily build up”. Many will no doubt agree and consider that among the reasons for this will be a regulator willing to fine firms for past transgressions notwithstanding current compliance, the substantially increased contributions required of all fee earners because the compensation fund will be called upon to meet the Axiom Ince losses, and not overlooking the substantial increases to employee NI payments announced in the recent budget as well.
Be that as it may the SRA has now issued its AML Annual Report for 2023-2024 which can be accessed at https://www.sra.org.uk/sra/research-publications/aml-annual-report-2023-24/, and we hope that help will now be at hand for those many firms and their Money Laundering Reporting and Compliance Officers in our now updated third edition of “Money Laundering Compliance for Solicitors”. We hope, of course, too that this will be helpful to you as you strive to meet the many demands that are now being placed upon your practice by the legal and regulatory obligations that you are subject to.