How To Get Ahead of Intensifying Scrutiny
7 Ways Solicitors Can Improve AML Compliance
3 December 2024
Anti-money laundering (AML) compliance amongst solicitors firms in the UK is in the spotlight. A recent report from the Solicitors Regulation Authority (SRA) highlighted that only 22% of firms reviewed fully met requirements.
In this article, we have provided seven practical steps to help firms meet regulatory expectations regarding their anti-money laundering (AML) obligations.
Argus Pro’s Aegis 9 Framework™ provides an effective solution to identify and address key areas of concern.
Here’s how it can help:
1. Conduct Comprehensive Firm-Wide Risk Assessments
The SRA found that 10% of firms either lacked compliant risk assessments or created them only after being asked. With the Aegis 9 Framework™, you can:
- Proactively assess all your anti-money laundering (AML) processes to identify vulnerabilities and gaps against regulatory expectations.
- Implement tailored recommendations to enhance your risk management.
We can help you understand all your AML-related risks and build and implement a risk assessment to meet your regulatory requirements.
2. Improve Client/Matter Risk Assessments (CMRAs)
Although there has been progress in this area, 12% of CMRAs remain ineffective.
Argus Pro can help you implement a Client/Matter risk assessment system tailored to your business's specific operating requirements and regulatory compliance requirements.
3. Strengthen Source of Funds Checks
One of the most cited issues in the report was the lack of evidence for Source of Funds checks, with 25% of files missing critical documentation. As you go through the Aegis 9 Framework™, you will be encouraged to:
- Demonstrate appropriate anti-money laundering (AML) processes for checking sources of funds.
- Show that the processes are consistently defined, documented, and applied across your firm and demonstrate adherence through evidence.
- Provide evidence that staff are appropriately trained in all applicable KYC, Transaction Monitoring, Sanctions, and PEPs procedures and know how to escalate issues if they perceive any vulnerabilities.
This eliminates doubts and risks and ensures compliance during audits.
4. Train and Supervise Fee-Earners Effectively
Inadequate training and supervision of fee-earners was a major factor in non-compliance with anti-money laundering (AML) obligations. Argus Pro can evaluate:
- Relevant staff’s knowledge of applicable policies and procedures and their ability to apply that knowledge in your firm’s specific operating environment
- Your firm’s compliance culture to ensure relevant staff are appropriately trained and have the required support for continuous professional development.
Well-trained staff can confidently manage complex AML requirements.
5. Assess Key AML Processes for Effectiveness
The SRA flagged issues with systems that allowed unchecked transactions to proceed without necessary customer due diligence (CDD). The Aegis 9 Framework™ evaluates:
- Your CDD policies and procedures.
- The consistency with which they are applied.
- Their effectiveness
- Your efforts to improve and optimise policies and procedures over time.
- Whether you have the processes to ensure that data is complete and accurate, and you can demonstrate this through evidence.
An objective, comprehensive, and proactive assessment strengthens overall compliance and demonstrates your firm’s ability to mitigate financial crime risk to regulators.
6. Conduct Independent Audits Regularly
Large firms are expected to perform independent audits, but smaller firms can benefit too. The Aegis 9 Framework™ provides:
- An objective assessment of all your AML processes, AFC-related data practices, and compliance culture.
- Tailored recommendations for addressing gaps.
- Confidence to demonstrate compliance.
Regular audits ensure your AML controls remain robust and up to date.
7. Build a Culture of Compliance from the Top
The SRA emphasised the need for senior executives to prioritise AML compliance. Argus Pro’s Aegis 9 Framework™ evaluates:
- How well Senior Executives set the right tone and lead by example.
- Your ability to embed AML compliance into firm-wide practices.
Leadership involvement ensures compliance becomes a core value, not just a checkbox.
Regulators are intensifying scrutiny.
Over the past five years, the Solicitors Regulation Authority (SRA) has intensified its enforcement actions against solicitors and law firms in the UK for non-compliance with Anti-Money Laundering (AML) regulations. This period has seen a notable increase in enforcement actions and the severity of fines imposed.
Enforcement Actions and Fines:
- 2018-2019: The SRA reported that 40 solicitors were struck off or suspended by the Solicitors Disciplinary Tribunal (SDT) in cases related to money laundering over five years. 1
- 2021-2022: The SRA imposed 301 internal sanctions, including 49 fines, marking a significant rise in enforcement activities. 2
- 2022-2023: Following the increase in the SRA's internal fining powers from £2,000 to £25,000 in July 2022, there was a substantial uptick in fines. In the 2023/24 financial year, the SRA issued 44 fines for AML breaches, totalling £556,832. 3
These figures and cases underscore the SRA's commitment to enforcing AML compliance within the legal sector. The increase in enforcement actions and fines reflects the regulator's dedication to upholding professional standards and mitigating financial crime risk.
Adopting a proactive approach is essential.
Using Argus Pro’s Aegis 9 Framework™, now you can address key weaknesses, improve processes, and stay ahead of regulatory demands.
Compliance is not just about avoiding fines; it’s about safeguarding your firm’s reputation and maintaining trust.
Engage with us to strengthen your organisation’s defences and build a robust compliance culture.
Sources:
https://www.sra.org.uk/sra/research-publications/2018-19-review/anti-money-laundering/