Over £600K levied against UK firms over the past year
When the Economic Crime and Corporate Transparency Act (ECCTA) passed last fall, the Solicitors Regulation Authority (SRA) was provided with increased powers to collect data and impose increased fines. The regulator did not waste a lot of time wielding its new clout.
Over the past year, the regulator increased firm site inspection visits by 34% and desk-based reviews by a whopping 350%. As UK firms are well aware, it completed a data collection exercise a few months ago, requesting data from all firms on AML, sanctions and suspicious activity reports (SARs). All this resulted in over £600K in fines being handed out to firms who were not in compliance this past year.
And the regulator’s recently released annual AML report indicates that there will likely be more this coming year. Among the report’s findings is this: Only 22% of firms were fully compliant with SRA regulations enabling financial crime and other criminal activity.
Another gem from the report highlights this: Nearly twice as many firms and individuals this year faced some form of fine or further punishments.
And now the SRA is ending the year with a bang: In November the regulator imposed £57K in fines on eight UK law firms. The SRA found significant shortcomings in their anti-money laundering (AML) controls including failing to implement required client and matter risk assessments (CMRAs) and firm-wide risk assessments (FWRAs).
And in an unprecedented move, this month, six firms were sanctioned over the course of three days. One was hit with a £25K fine for failing to have in place a documented risk assessment and failing to have the required policies, controls and procedures for over10 years. Another was fined £25K for failing to maintain records of its risk assessments of clients and their matters in six files that were reviewed by the SRA. The remaining four were fined a total of £58K.
The moves underscore that the SRA is doing what it said it would. It is committed to enforcing regulatory standards in the legal sector, especially concerning AML compliance.
Interestingly, the SRA’s report also points to two critical items that are behind the increase in action against firms. The first is that senior executives are not placing enough importance on having robust, effective AML procedures in place and the second is that firm’s training programmes, if they have, are not effective.
Firms obviously need to start thinking proactively to ensure that their AML practices are documented and fully compliant. Make no mistake: The SRA has made clear its intent to continue monitoring compliance closely, with non-compliant firms facing strict penalties and the reputational damage that accompanies that.
Preparing for 2025: What law firms can do
The SRA’s crackdown on AML compliance is reshaping the regulatory environment. Firms that fail to adapt risk more than just fines—they face reputational damage, operational disruption, and even closure. With the SRA’s enhanced capacity for audits and its intent to enforce stricter penalties, law firms must act now to safeguard their future.
Conduct robust risk assessments
Firms should critically evaluate their AML processes, identify compliance gaps, and implement tailored policies to address these vulnerabilities. This includes ensuring that client/matter risk assessments are effective and documented.
Strengthen policies, controls, and procedures
Automated systems can help enforce compliance, such as “stop” mechanisms for transactions where due diligence is incomplete.
Prioritise training
With the SRA’s focus on training during its next thematic review, firms must ensure that staff at all levels receive comprehensive and ongoing AML education.
Leverage technology
Adopting RegTech solutions like AI-powered monitoring and digital ID checks can streamline compliance processes. However, firms must vet providers carefully to ensure quality.
Stay informed and agile
Firms must monitor the outcomes of the SRA’s consultation and be ready to adapt swiftly to new guidelines.
