The SRA has published an updated version of its Sectoral Risk Assessment on Anti-Money Laundering and Terrorist Financing. The assessment is a key document and must be taken into account when preparing and maintaining a firm’s practice-wide (firm-wide) risk assessment.
The updated version reflects developments in the UK’s National Risk Assessment and evolving supervisory expectations. For many firms, this will necessitate a documented review and update of existing AML risk assessments and, in some cases, wider compliance frameworks.
What Has Changed?
While the overall risk exposure of the legal sector remains high, the revised assessment introduces several important developments:
1. Updated National Risk Context
The SRA has aligned its analysis with the latest UK National Risk Assessment. This reinforces the continued high money laundering risk within legal services and emphasises the importance of robust controls.
2. New and Expanded Risk Areas
The SRA identifies a number of areas requiring greater scrutiny, including:
- Capital flight from high-risk jurisdictions
- Risks associated with client accounts
- Inadequate or poorly evidenced customer due diligence
- Changing firm business models that may create AML vulnerabilities
These risks are likely to be of particular relevance to firms undertaking transactional work, handling significant client funds, or operating across jurisdictions.
3. Reclassification of Emerging Risks
Certain risks previously described as “emerging” — including proliferation financing and vendor fraud — are now considered embedded within the sector’s risk landscape. This signals that firms should treat these as ongoing and material risks rather than theoretical or developing issues.
4. Greater Focus on Sanctions Compliance
The assessment contains expanded commentary on sanctions risk in light of geopolitical developments and increased enforcement activity. Firms should ensure their sanctions screening processes and escalation procedures remain effective and appropriately documented.
5. Terrorist and Proliferation Financing
There is increased emphasis on terrorist financing and proliferation financing exposure, particularly in areas such as trust and company services. Firms offering these services should ensure their risk assessments clearly address these issues.
What Should Firms Do Now?
The SRA is explicit that firms must take the Sectoral Risk Assessment into account when maintaining their firm-wide risk assessment.
Firms should therefore:
- Conduct a documented review of their existing practice-wide risk assessment.
- Update risk ratings where appropriate.
- Ensure policies, controls and procedures reflect the revised risk profile.
- Review sanctions frameworks and screening arrangements.
- Consider whether additional training or internal guidance is required.
- Retain clear evidence of the review process in anticipation of supervisory engagement.
In our experience, the SRA increasingly expects to see not only updated documentation, but a clear audit trail demonstrating active engagement with sectoral developments.
We Can Help
We are currently supporting a number of firms in reviewing and refreshing their firm-wide risk assessments and AML frameworks.
If you would like assistance reviewing or updating your documentation, or preparing for potential supervisory engagement, please get in touch.
