The Solicitors Regulation Authority recently conducted a thematic review on Anti-Money Laundering training, revealing crucial insights into where law firms excel in compliance and where they need improvement. VinciWorks were proud to have contributed to this review and shared our insights as a leading provider of compliance solutions to the sector, With significant regulatory and reputational risks on the line, AML compliance is a priority that demands attention, particularly in high-risk sectors such as legal services. Here’s a breakdown of the key findings, best practices, and actionable steps law firms must take to stay compliant.
Understanding the importance of AML training
Law firms play a pivotal role in preventing money laundering, making their compliance with AML training regulations essential. Under the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 (MLRs), law firms must regularly train their employees to recognise and report suspicious activities. The SRA report emphasises that firms need to understand not only what to do but why AML procedures are critical to safeguarding their practices from financial crime.
AML training helps staff identify risks and avoid inadvertently becoming involved in financial crimes, with a potential for criminal penalties if they fail in their duties.
What firms must do to comply
The SRA’s review highlights the following requirements for law firms to remain compliant:
- Employee awareness and training: Firms must ensure that employees are trained on money laundering regulations, terrorist financing laws, and relevant data protection requirements.
- Ongoing and comprehensive training programmes: AML training should not be a one-time event but a continuous practice. Programs should be interactive, utilising real-life case studies to keep training relevant and engaging.
- Documenting training efforts: Under the MLRs, firms must keep detailed records of all training activities, including attendance logs, training materials, and any assessments. This documentation should be readily available for inspection by the SRA.
Key findings from the thematic review
The review underscores several significant trends observed in the sector:
- Enhanced training for MLCOs: Firms where Money Laundering Compliance Officers (MLCOs) received additional training were approximately 50% more likely to be compliant than those without enhanced MLCO training.
- Interactive and customised training: The SRA found that firms relying solely on standard training packages often missed opportunities for relevance. Bespoke training solutions tailored to specific firm risks and real-world scenarios proved more effective in maintaining compliance.
- Frequency and variety of training: Continuous and diversified AML training, such as e-learning modules, team discussions, and short “bite-sized” training sessions, increased engagement and compliance rates.
Implementing the ROLE framework
The SRA suggests that firms adopt the ROLE (Relatable, Ongoing, Leadership, and Engaging) framework to make AML training more effective:
- Relatable: Training should be specific to an employee’s role and firm’s particular risk profile, with content tailored to the types of services the firm provides.
- Ongoing: Given the evolving nature of financial crime tactics, AML training must be a continuous process, involving regular updates and refresher sessions.
- Leadership-driven: Senior management’s active involvement in AML training sends a strong message about its importance, fostering a culture of compliance.
- Engaging: Interactive training using case studies and real-world examples keeps staff engaged, helping them retain critical AML information and stay alert to red flags.
Common pitfalls and areas for improvement
The review identifies some prevalent issues among non-compliant firms, including:
- Tick-box approach: Some firms view AML training as a “tick-box” exercise, focusing solely on regulatory requirements rather than integrating meaningful compliance practices into their operations.
- Lack of tailored training: Generic training packages often fail to address firm-specific risks, leaving gaps in staff preparedness.
- Poor record-keeping: Failure to document training activities, such as attendance and content, can lead to non-compliance during SRA inspections.
Best practices for AML training in law firms
The SRA encourages law firms to follow these best practices for effective AML training:
- Utilise a mix of training methods: A blend of e-learning, face-to-face sessions, webinars, and “lunch and learn” events can cater to diverse learning styles and keep AML top of mind.
- Integrate real-life scenarios: Case studies and news articles about recent money-laundering cases reinforce the relevance of AML practices and help staff understand the impact of their vigilance.
- Maintain comprehensive training records: Detailed logs and records help firms demonstrate compliance during SRA inspections and track who has received AML training and when.
- Encourage continuous learning: Regular updates on new risks, such as emerging techniques in money laundering, keep employees informed and responsive.
Next Steps for Law Firms
To support ongoing compliance, the SRA has developed a downloadable AML training checklist to help firms structure their programs effectively. This checklist covers essential elements of an AML training programme, including:
- Recognising “red flags” in client interactions
- Conducting due diligence and source of funds checks
- Staying up-to-date with changes in AML legislation
The SRA also recommends that MLCOs and MLROs participate in additional, specialised training to strengthen their knowledge and oversight capabilities.
AML training is a vital component in protecting law firms from money laundering risks, and it is an ongoing responsibility. By adopting tailored, interactive, and continuous training programs, firms can not only comply with SRA regulations but also foster a culture of vigilance and integrity.
Speak to VinciWorks today for more on making the best of your AML training.
