The SRA promises strong action against firms who fail to comply with AML obligations
The Solicitors Regulation Authority (SRA) has published its Risk Outlook for 2020/21 with a segment dedicated to the ever-growing concern of Anti-money laundering. At OneSearch, we know solicitors are busy at the best of times, and certainly now, so we have provided a summary of the key takeaways for you.
SRA gives special mention to vendor fraud
The SRA is sympathetic to the difficult circumstances law firms are dealing with, but stress this will not be considered should they be found to be non-compliant.
In the Risk Outlook, the SRA asks that law firms are especially alert to suspicious vendor behaviour due to a worrying trend of increased vendor fraud. They list eight red flags:
- the property price is significantly over or under the market value
- the seller or buyer is reluctant or unable to provide documents
- ID documents do not look genuine
- there is pressure to complete the transaction very quickly
- minimal work is instructed, for example, no searches are requested
- there are complex or unusual circumstances around the transaction
- it is a cash purchase of a property
- funds are coming from or going to unconnected third parties
How to manage AML risk and comply with current and future regulations
Whilst the SRA acknowledges that law firms are suffering from issues such as staff shortages, a tight SDLT deadline, and ongoing business adjustments related to the covid-19 pandemic response, it firmly reminds all law firms that not carrying out the appropriate money laundering controls is an offence they take very seriously.
The following requirements and processes are reiterated:
- Have a written and compliant firm-wide risk assessment
- Maintain policies, procedures and controls to prevent money laundering
- Train relevant staff
- Ensure SRA approval for relevant positions (beneficial owners, officers and managers)
- Obtain an independent audit (where relevant as a result of the size and nature of your firm)
- Ensure ongoing monitoring of all transactions
- Carry out customer due diligence (CDD) and enhanced due diligence (EDD) checks where needed
- Complete Suspicious Activity Reports (SAR) where necessary
The SRA lists additional recommendations from the Legal Services Affinity Group (LSAG) for firms to monitor:
- being asked to work with unusual types of consumers or to do work that is different to your firm’s normal area of experience or expertise
- being pressured to avoid CDD checks or to ’speed up’ the process
- any attempt to make deposits into your client account where no legal services are provided
- transactions where the business rationale is not clear
Solutions for AML compliance
The SRA offers the following guidance on how to manage your CDD under the current circumstances:
“Many firms will have found CDD, including appropriate levels of identification and verification, more difficult because of lockdowns and social distancing. Electronic verification tools can help firms carry out these tasks, but it is important that firms use them appropriately.”
The use of electronic checks is further supported by the LSAG, who propose that law firms consider using electronic tools to help inform CDD decision making.
At OneSearch, we’ve also found electronic checks to be beneficial to law firms conducting CDD. In fact, 1 in 4 of the top 500 law firms use the service we recommend and have made available on our ordering platform.
SmartSearch is a quick but accurate and vital way for law firms to carry out their due diligence. Created with the highest quality data, the SmartSearch Individual AML Search addresses all KYC, AML, Sanction & PEP compliance needs with global coverage and with ith no need to collect documents.
In addition, all searches return seven proofs of identity from six independent sources, including Experian, Equifax, Dow Jones and Companies House, giving you the best reassurance possible that you are complying with your CDD obligations.
If you would like to read more about this product, please click here.
To add this product to your existing search bundles and solidify your AML process, please contact your Regional Manager, or call us on 01782 433270 and we’ll be happy to assist you.