The SRA Draft Business Plan and Budget, November 2020 to October 2021 proposes a 20 per cent increase on spending on AML supervision with visits to all high-risk firms on a three-year rolling basis, along with visiting a sample of lower risk firms. Every month the SRA will call in and analyse a sample of firms’ AML policies, procedures and controls, or their risk assess-ments, and they are planning to undertake a thematic review into tax advice.
The Financial Conduct Authority’s Final Notice imposing a £37,805,400 fine on Com-merzbank London over AML failures contains points to note for professional services firms generally. Although more extreme than we have seen when undertaking audits under Regulation 21 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, they do touch on areas where firms experience difficulty in compliance.
There were no suggestions of money laundering taking place. Breaches included a significant backlog of refreshing customer due diligence (CDD) checks due to understaffing, leading to an exceptions process which was inadequately understood. A file review of CDD by Compliance failed to identify failures over the risks associated with clients that had an “element of state ownership (in high risk jurisdictions), and a number of politically-exposed individuals on their board”.
There were multiple failures in relation to Politically Exposed Persons (PEPs) and sanctions screening, and in identifying beneficial ownership, in many cases being too willing to accept responses and information from the customer without independently verifying or challenging them.
Whilst not directly in the news on AML, complex property ownership structures, for example involving offshore investors, and multiple layers of ownership, were identified by the National Audit Office as a cause of delay in remediating dangerous cladding on high‑rise buildings.
For links to the above see www.legalrisk.co.uk/News. See also our Resources page, www.legalrisk.co.uk/AML.
We have carried out Regulation 21 audits on several leading US and UK-based law firms and advised on regulatory investigations, including a significant recent success for one large firm which was facing disciplinary action, following an overly zealous interpretation of the statutory requirements (not by the SRA), which has now been dropped. We are seeing a theme developing with SRA attention to procedures on refreshing CDD, training, screening and data protection aspects of AML compliance. For further information, please contact [email protected].
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