https://www.legalfutures.co.uk/latest-news/sra-hands-out-550k-in-aml-fines-in-three-months

The Solicitors Regulation Authority (SRA) has levied fines totalling £550,000 in the past three months on law firms that breached basic anti-money laundering (AML) rules.

In several cases, it reduced the fine as calculated in accordance with its guidance to £25,000, the maximum the SRA impose on traditional law firms, so that it did not have to refer them to the Solicitors Disciplinary Tribunal.

The regulator has handed out a steady stream of fines over the last couple of years to firms that have not been able to show that they comply with the 2017 Money Laundering Regulations.

The common failures have been not having in place a firm-wide risk assessment and/or policies, controls and procedures to mitigate and manage effectively the risks of money laundering and terrorist financing, and not undertaking client and matter risk assessments (CMRAs).

Since we last reported on AML fines in late September, the SRA has fined 46 firms across England and Wales. The money goes to HM Treasury.

Only one was for more than £25,000 – £31,045 for Southampton-based property and private client practice CGM Hampshire, which is an alternative business structure (ABS). As ABSs fall under a different legislative regime, they can be fined up to £250m. This firm failed to have a FRWA in place for seven years.

Seven traditional firms saw fines calculated in excess of the £25,000 maximum reduced. The biggest was Barnsley firm Elmhirst Parker, whose initial fine came out at £41,000 for not having policies, controls and procedures, or conducting CMRAs. It was acquired this autumn by Pepperrels.

City firm Carter Lemon Camerons, which failed to conduct CMRAs, had been initially fined £39,500.

A Legal Futures investigation earlier this year highlighted how many of the firms fined for AML breaches are members of the Law Society’s Conveyancing Quality Scheme and/or Lexcel scheme, raising questions about how rigorously the standards – which both require AML compliance – are policed.

Of the 46 firms, 35 (76%) were members of the CQS and four also had Lexcel accreditation.

Separately, a Mayfair law firm has been fined £23,588 for failing to take adequate measures to establish the source of wealth and/or funds (SoW/SoF) of a non-domestic politically exposed person (PEP).

According to a regulatory settlement agreement, Charles Douglas Solicitors acted for the PEP and their associated companies across 194 matters between June 2021 and February 2024, consisting primarily of residential property purchase transactions (103 matters) and refinance matters (85 matters). Many were aborted but at least 56 proceeded to completion.

The firm obtained substantial SoF information, the SRA said, but “could not evidence that it had taken adequate measures to establish the SoF received from remitting parties representing less than 1% of the money received. The money received by the firm exceeded £10m, in a significant number of different transactions”.

Similarly, despite having a lot of SoW information, Charles Douglas failed to undertake further checks after the financial statements of the PEP’s overseas business interests “raised concerns as to the scrutiny applied by the firm regarding the non-domestic PEP’s wealth”.

The financial statements showed substantial revenue, minimal business expenditure and most of the net profit being paid out immediately as dividends.

“While no funds from these overseas business interests were remitted to the firm, it could not evidence that it took adequate measures to establish the SoW of the non-domestic PEP,” the SRA said.

In calculating the fine, the SRA acknowledged that Charles Douglas applied the enhanced measures required for a non-domestic PEP. These were “not fully compliant with the requirements of the MLRs 2017… but only as to less than 1% of the funds received”.

The basic penalty was calculated at £31,451 but reduced by 25% “to account for early admissions and full cooperation with our investigation”.