How To Improve Your AML Compliance And Prevent Money Laundering

Earlier in 2019, the Solicitors Regulation Authority (SRA) in the UK asked 400 firms to demonstrate compliance with the 2017 Money Laundering Regulations. The initial review showed that 1 in 5 law firms failed to comply.

The SRA announced that they will soon be contacting 7,000 firms that fall under the scope of the Regulations and declared they would take a proactive enforcement approach towards firms who don't comply.

So far this year, the SRA has opened 172 investigations linked to anti-money laundering compliance, and in the last five years has taken more than 60 such cases to the Solicitors Disciplinary Tribunal, which has resulted in over 40 solicitors being struck-off or suspended.

In this article, we consider five steps law firms should be taking now to implement robust anti-money laundering (AML) solutions to satisfy regulatory compliance requirements in the UK and protect the firm from money laundering attacks.

How to Implement AML Compliance in a Law Firm: 5 Proven Steps

1. Create and maintain an effective firm-wide risk assessment

   The SRA discovered that 40 firms failed to have a written firm-wide risk assessment in place, which is a breach of Regulation 18. The risk assessments presented were often inappropriate to the size of the firm, its geographical coverage and the services offered.

   Creating and regularly updating a bespoke firm-wide risk assessment should be at the top of the priority list. Take time to outline what money laundering risks your firm faces and what steps you are taking to mitigate that risk. Firm-wide risk assessment should be the foundation of your AML processes and inform your policies, controls and procedures, which are compulsory under Regulations (18-21).

   When formulating a firm-wide risk assessment, it is imperative to take sectoral risk into consideration:

   Clients - Are any of your clients Politically Exposed Persons or their close connections? Geographical coverage of your services - Do you operate in high-risk jurisdictions - countries with high levels of corruption or those that do not have equivalent AML standards to the UK? Products and services - Are you involved in conveyancing, trust and company formation, client accounts services? Transactions - Do you deal with high-value transactions? Delivery channels - Do you often work with remote clients or clients that combine various services? Do not confuse a firm-wide assessment - which evaluates the money laundering risk to the entire business -...