2018 is shaping up to be a busy year for those involved in law firm compliance. Quite aside from preparing for the most significant overhaul of data protection rules for a generation, achieving ongoing compliance with existing rules is not necessarily a given.
Earlier this month, the Solicitors Regulation Authority (SRA) published the results of its most recent money laundering review, and the results were not especially encouraging. Of the 50 law firms visited, only one-third had a firm-wide risk assessment in place or were in the process of implementing one – despite this being a requirement of the money laundering regulations that came into force in June 2017.
In fact, the SRA had “serious concerns” about the processes and practices of six of the firms reviewed – 12% of the total. These firms have now been referred to the SRA’s disciplinary process.
Why are so many firms not yet compliant with regulations that have been in place for over eight months? It certainly doesn’t help that the final draft of the legislation was only released a couple of days before it came into force. Nor does it help that the Legal Sector Affinity Group (LSAG) guidance only received HM Treasury approval earlier this month.
Back in June 2017 when the new rules had just been released, the SRA suggested it would take a pragmatic approach to enforcement, acknowledging that firms still needed to digest the requirements. The regulator expected written procedures – properly applied, effective assessment of the firm’s risk profile, a suitably senior MLRO, and records of internal reports. However, the SRA’s recent findings show that a number of firms are not meeting these expectations, and the SRA says it expects firms “to move towards compliance as a matter of urgency”.
Sources of help
The SRA has published some self-assessment questions for firms to help them identify and address their own compliance gaps. You can find them on the review page at https://www.sra.org.uk/sra/how-we-work/reports/preventing-money-laundering-financing-terrorism.page.
The LSAG guidance, at around 150 pages, is comprehensive and Treasury-approved. Firms should review this guidance for assistance in understanding how the regulations should be interpreted by legal practices, where terminology and concepts can be applied somewhat differently to how they are used in the regulations. You can download the guidance from https://www.sra.org.uk/documents/solicitors/code/lsag-anti-money-laundering-guidance.pdf.
AML health check
If your firm would benefit from bespoke assistance or training, get in touch with our in-house training team. Find out more at http://www.clt.co.uk/in-house.aspx.