SRA's Anti Money Laundering Report May 2016
The report summarises the findings of the SRA thematic review of anti money laundering compliance in law firms, conducted between October 2014 and…
The report summarises the findings of the SRA thematic review of anti money laundering compliance in law firms, conducted between October 2014 and May 2015.
The aim of the report is to highlight the requirements of the Money Laundering Regulations 2007, the Proceeds of Crime Act 2002 and the Terrorism Act 2000 and to provide best practice recommendations. The compliance policies, procedures and controls of each firm visited were reviewed and they were also assessed on their awareness of statutory and regulatory obligations and forthcoming regulatory changes.
The key points covered in the report included the role of the MLRO, AML policies, client due diligence, AML training and awareness, reporting and record keeping.
The SRA concluded that the vast majority of the firms visited ‘take their responsibilities seriously and compliance is good’. However, there were several weaknesses highlighted, for example:
- Source of Funds/ Wealth- insufficient knowledge and understanding of how to establish and differentiate between the source of funds and source of wealth and insufficient supporting documentation being obtained.
- Enhanced due diligence and PEPS – lack of understanding in applying enhanced due diligence and identifying Politically Exposed Persons.
- Ongoing Monitoring of AML policies- Evidence that policies were not being reviewed on a regular basis to ensure that they are up to date and used effectively.
- Training- Training was not appropriate to the staff involved i.e. finance staff training. Testing of understanding was often not carried out and regular ‘refresher’ training not undertaken.
- Systems and Controls- inadequate processes in place to test and measure the effectiveness of their systems and controls.
The report was seen by the SRA as an ‘opportunity to share best practice, as well as to flag where improvements could be made’ and it highlights both good and bad practices in order to do so.
It concluded that the effectiveness of AML systems and controls often hinged on the underlying compliance culture of a firm and that there is a need for an initial risk assessment which is pertinent to the firm and the type of legal services offered, client base and jurisdiction risk.
The regulatory landscape is ever evolving and money laundering remains a priority risk for the SRA in 2016. Forthcoming changes to regulation, which includes the 4th Money Laundering Directive, will mean firms will have to adopt a risk based approach, with a requirement for written AML/ Counter Financing of Terrorism risk assessments, policies and procedures to be in place.
Where does your firm stand? Do you identify with any of the weaknesses highlighted?
If you don’t know where to start in risk assessing your AML framework or need help in reviewing and updating your policies and procedures, call the Compli team who can help.
We also offer e-learning on AML and other regulatory subjects and would be happy to demonstrate our e-learning platform to you.
Call our helpline on 0345 070 1047 if you need advice and support on AML or any other aspect of compliance and risk.