Solicitors Regulation Authority (SRA) Annual Anti-Money Laundering Report 2023-24

Solicitors Regulation Authority (SRA) Annual Anti-Money Laundering Report 2023-24

The Solicitors Regulation Authority (SRA) has released its annual report for 2023-24, detailing the organization’s ongoing efforts to combat money laundering and financial crime within the legal sector. This year’s report reflects the increased regulatory pressures on firms to comply with anti-money laundering (AML) requirements, underlined by the passing of the Economic Crime and Corporate Transparency Act. This legislative change has granted the SRA new powers to impose substantial fines and reinforces its commitment to preventing economic crime.

Key Highlights and Actions Taken

In the past year, the SRA performed 545 proactive engagements with law firms, including inspections, desk-based reviews, and thematic work on client and matter risk assessments (CMRAs). The SRA also completed 55 sanctions inspections and submitted 23 suspicious activity reports (SARs) to the National Crime Agency, with funds related to these reports totaling over £75 million. With 78 enforcement actions taken, the report reveals the SRA’s robust stance on enforcing AML regulations.

Areas of Concern: Compliance and Training

The report emphasizes the importance of firm-wide and client-specific risk assessments in identifying and mitigating money laundering risks. Findings from desk-based reviews and onsite inspections identified recurring issues: lack of effective risk assessments, inadequate client due diligence (CDD), and poor training for staff on AML regulations. For instance, 25% of reviewed cases lacked adequate source-of-funds documentation, while 19% of files did not include mandatory CMRAs. These deficiencies highlight the need for greater diligence in training and internal controls.

Compliance Levels and Enforcement

Out of the 545 firms engaged, only 110 were deemed fully compliant, while 284 were partially compliant, and 118 were non-compliant. The SRA implemented several enforcement actions, including fines and compliance plans, to rectify AML violations. The report also notes that compliance has improved since last year, with 52% of reviewed firm-wide risk assessments meeting compliance standards, a slight increase from 49% in the previous year. However, 10% of assessments still fell short, underscoring the need for ongoing improvements.

Proactive Measures and Industry Collaboration

The SRA has focused on proactive supervision, introducing new guidance on CMRAs, conducting roundtable events, and issuing compliance notices to clarify expectations. In collaboration with the National Crime Agency, the SRA held a webinar aimed at enhancing understanding of AML obligations among legal professionals. These initiatives are designed to foster a culture of compliance and enable firms to take proactive steps against money laundering.

Emerging Concerns and the Path Forward

The report points out emerging issues related to the sanctions regime, particularly concerning transactions involving Russian entities. The SRA is working closely with the Office of Financial Sanctions Implementation to address these cases. Moving forward, the SRA plans to intensify its focus on high-risk transactions, reinforce AML compliance measures, and engage with larger firms to maintain alignment with AML regulations.

The 2023-24 report reaffirms the SRA’s commitment to strengthening the regulatory framework for legal professionals, highlighting both achievements and areas for improvement.

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