Three-solicitor Bristol conveyancing law firm Batchelor Sharp has been fined £23,000 by the Solicitors Regulation Authority for breaching its anti-money laundering regulatory obligations, despite the fact that there was no harm caused by the firm’s failings. The fine is close to the maximum of £25,000 that the SRA can fine firms, following changes to the regulation in 2022 increasing its fining powers.
Under UK money laundering regulations, law firms must carry out client/matter risk assessments to identify and assess risks of money laundering and terrorist financing.
In March 2023, the SRA’s Anti-Money Laundering (AML) Proactive Team undertook a desk-based AML review at Batcherlor Sharp. It found – and the firm accepted – that five files assessed by the SRA had no client/matter risk assessments.
Batchelor Sharp was directed to pay a penalty of £23,035.50 and ordered to pay costs of £1,350.
The SRA ruled that the firm’s conduct was serious because it was a breach of its regulatory obligations which persisted for longer than reasonable and demonstrated a pattern of non-compliance. It also found that the firm’s conduct had the potential to cause serious harm to the public interest and public confidence in the legal profession. The SRA concluded that the firm’s conduct warranted a financial penalty of 1.6% to 3.2% of annual domestic turnover.
Mitigating factors included that the firm had not acted dishonestly or lacked integrity, there was no material harm caused, and it had cooperated with the SRA and remedied its breaches.
The SRA has handed out a number of deterrent-inducing fines around or above £20,000 since its powers increased, including Oxfordshire firm Ferguson Bricknell, who received an at the time record fine of £20,000 at the start of 2023. In that case the SRA also accepted that there was no evidence of harm to third parties.
Reviewing your matters regularly is becoming more and more important. Back-office staff can create reports on dormant matters with no movement for say 6 months and can chase fee earners to deal with residual balances, however this admin task currently has a low priority. Not anymore! Firms will be at risk of such matters being detected by the SRA and potentially fined by not having undertaken any risk and KYC checks for a long time. A couple of questions. What processes are in place for creating matter 3 for a client, it will not be matter 1 where the client walks in with a suitcase full of used fivers! What processes are in place to regularly review open matters? Oh and make sure the documents supplied are not 6 years old, no matter how urgently a partner needs a matter number!
In addition to Risk and KYC/AML checks ( as part of ) firms also need to ensure that they are not working with Sanctioned entities and the number of sanctioned entities ( people, companies, regimes, countries ) is increasing all the time. Russian and Belorussian sanctioned entities being a particular focus.