Around a fifth of law firms would fail money laundering compliance assessments if they were asked to complete them on the spot, a major new study has revealed.
The report, published by the legal regulator, the Solicitors Regulation Authority (SRA), shows that a significant number of law firms could be abused by criminals to move dirty money.
According to the regulator’s 2019 Risk Outlook, an annual study of the sector’s finance function, a fifth (21 per cent) of law firms failed to meet the standards set out in the 2017 Money Laundering Regulations.
More than 400 firms were asked to demonstrate compliance with the regulations by sending their firm’s risk assessment.
Of those who failed to comply, about half did not address all of the risk areas required, while the remaining organisations did not differentiate between a ‘firm risk assessment’ and a client or matter risk assessment.
The SRA also expressed concern over the large number of law firms using ‘copy and paste’ template risk assessments. The regulator said doing so may comply with the rules, but may not account for unique risks faced by law firms working in niche sectors.
It was also suggested that around four in 10 (38 per cent) firms who passed the review may have only created a firm risk assessment as a result of the regulator’s request.
Commenting on the study, Paul Philip, SRA Chief Executive, said: “Money laundering supports criminal activity such as people trafficking, drug smuggling and terrorism. The damage money laundering does to society means that every solicitor must be fully committed to preventing it. The vast majority would never intend to get involved in criminal activities, but poor processes open the door to money launderers.
“A call from us should not be the prompt for a firm to get their act together. You need to take immediate action now if you are not on top of your money laundering risks. Where we have serious concerns, we will take strong action.”
For help and advice with risk assessments, please get in touch with our expert team.