https://www.legalfutures.co.uk/latest-news/law-firm-slapped-with-80000-fine-for-aml-breaches

A London law firm has been fined nearly £80,000 by the Solicitors Regulation Authority (SRA) for failures to comply with the anti-money laundering (AML) rules, one of the largest to date.

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 (PCPs) to mitigate and manage effectively the risks of money laundering and terrorist financing, and not undertaking client and matter risk assessments (CMRAs).

At the moment, the maximum fine the SRA can impose on traditional law firms is £25,000, meaning it has to refer cases to the Solicitors Disciplinary Tribunal, which has unlimited fining powers, where it believes more is warranted – it did this recently with Southend firm Tolhurst Fisher, fined £120,000 and US firm Simpson Thacher & Bartlett, fined £300,000.

However, the upper limit is £250m for alternative business structures (ABSs) and the SRA announced a £77,784 fine yesterday for Gordons Partnership, an ABS which has offices in Chancery Lane and in Guildford.

The SRA found that the firm failed to carry out a CMRA on six files it reviewed covering three years, as well as issues around identification and verification on one file and a lack of source of funds checks on four.

Further, between October 2021 and April 2024, the firm failed to maintain fully compliant PCPs and also failed to carry out an independent audit.

In a regulatory settlement agreement, in which Gordon Partnership admitted the breaches, the SRA said these amounted to “serious AML control environment failings”.

Between a fifth and a third of the firm’s work was in-scope of the 2017 regulations – more than £1m worth of work – and so there was the potential to expose the firm “to a significant risk of being exploited by criminals”.

In deciding a fine was appropriate, the SRA said there was “no evidence of harm” to consumers or third parties, while the firm has “cooperated fully, has admitted the breaches, shown remorse and remedied the breaches, and there is low risk of repetition”.

Applying the SRA’s fining guidance led to a broad penalty bracket of between 1.6% and 3.2% of the firm’s annual domestic turnover, resulting in a basic penalty of £111,120. This was reduced by 30% in light of the mitigation.

We reported recently that the SRA was working to activate its new power to levy unlimited fines on all types of firm in cases of economic crime.

SRA chief executive Paul Philip said last month: “We are concerned that we’re still finding fairly basic deficiencies in AML arrangements within firms.

“It’s probably not deliberate – it’s probably lots of smaller firms that are just not au fait [with the rules] or don’t have capacity or just not paid attention, but the fact is that not having things like a risk assessment in place increases the probability of money laundering.

“We’ve been saying this for years so we will continue to ratchet up the consequences for people who don’t comply.”

The SRA recently issued its largest ever fine, £4m, to the non-lawyer owner of collapsed law firm Kingly. Up to then, the most it had used its ABS power was £232,500 for London firm Mishcon de Reya in 2022. This related mainly to AML breaches on specific matters but also included not having an FWRA.

In another regulatory settlement agreement published yesterday, Sutton Coldfield firm Moseley Chapman & Skemp was fined £9,419 for not having an FWRA between June 2017 and May 2024, and subsequently having a non-compliant one for six months.

The conduct “showed a disregard towards statutory and regulatory obligations and had the potential to cause harm”, the SRA said, but acknowledged that the firm – around half of whose work is conveyancing – had co-operated and remedied the breach. There was no actual harm caused.

The fining guidance here led to a penalty bracket of between 0.4% and 1.2% and the SRA set it at the “upper end”, resulting in a figure of £11,774, reduced by 20% because the mitigation.

Our previous summary of the fines issued for similar breaches, in mid-May, recorded that there had been 50 fines totalling £575,000 in the previous six months.

Since then, there have been seven more, excluding yesterday’s two, totalling £92,000. They include a maximum £25,000 fine for Peterborough firm Sloan Plumb Wood, which is not an ABS, for not having a compliant FWRA or compliant PCPs for nearly eight years.

The fine was set at the “lower middle end” of the 1.6% to 3.2% band, leading to a figure of £32,988, and then reduced by 21.2% to £25,000 due to mitigation. It is likely this was done to avoid having to refer the firm to the tribunal.

Money from fines go to HM Treasury.