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Revealed: Fines mount up as SRA cracks down on AML breaches
8 March 2024

The Solicitors Regulation Authority has ramped up the frequency and harshness of sanctions for money laundering breaches in the past six months, new analysis has shown.

Since the beginning of October, the regulator has issued or agreed 19 fines with firms for failing to comply with money laundering regulations. Ten of these have been for at least £10,000, with the largest financial penalty being issued to national firm Ashfords for £100,000 in November (this was the only firm in the top 100 sanctioned for AML breaches over the last year).

The total fines for AML breaches come to around £290,000 – all of which is paid to the Treasury, rather than the SRA.

In contrast, SRA decision records show it issued just six AML-related fines in period from March to October last year – the highest being for £5,250.

The figures reflect a number of factors coming together at the same time which has added to the seriousness and regularity of financial penalties for anti-money laundering rule breaches.

In 2022, the SRA was granted the right to increase its fining powers from £2,000 to £25,000 (the regulator has since lobbied to make this an unlimited power).

Then was the further reform to the SRA’s approach on financial penalties which came into force in the middle of last year. For all firms, where a fine is to be imposed, the decision maker will now usually determine the penalty as a percentage of annual domestic turnover, up to a maximum of 5%. The idea of this was to create a penalty which would be likely to deter any repetition by the same firm or others, and to uphold public confidence in the profession.

At the same time, the SRA has made no secret of its mission – partly brought on by pressure from the government – to crack down on firms who do not have adequate systems in place to prevent money laundering.

SRA chief executive Paul Philip has developed the regulator’s role as an anti-money laundering supervisor and stressed last year that solicitors play a key role.

Philip told last year’s Law Society Risk and Compliance Annual Conference that the regulator has found itself as ‘piggy in the middle’ between the profession and the government.

‘There is nothing we can do to stop the onslaught of regulatory requirements coming from direct legislation which we are forced to implement,’ he added.

The latest firm to be sanctioned for non-compliance with MLRs was Harrow practice Burrows, which was this week fined almost £13,000 for failing to have in place or to maintain relevant documentation to prevent activities relating to money laundering and terrorist financing.

Non-compliance with the requirements as set out in MLRs went on at the firm for almost six years and demonstrated a ‘pattern of non-compliance’. The level of fine was set at 2.4% of the firm’s annual turnover to reflect the risk that harm might be caused – although, as with most such fines issued by the SRA, there was no evidence that actual harm had materialised.

The SRA is keen to stress that some of its perceived increase in activity is only a reflection of it handling cases that would have previously been dealt with by the Solicitors Disciplinary Tribunal.

In 2021, the last year before the SRA increased its fining powers, the tribunal issued 35 fines with a total value of £443,000. These figures do not break down what the fines were for and so do not specify how many related to AML breaches.

Source: The Law Society Gazette, 8th March 2024

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