Risk Update

Law Firm AML News — Firm Failure Forces Fines, Chatham House Report Raises Eyebrows, SRA on AML Governance

Posted Dan Bressler

“Mishcon de Reya fined £232,500 over numerous AML failings” —

  • “High profile London firm Mishcon de Reya has agreed to pay £232,500 – one of the biggest fines ever imposed by the regulator – over several breaches relating to money laundering rules.”
  • “The firm admitted failing to secure adequate due diligence on four related clients and misplacing the evidence of diligence it had carried out.”
  • “It was also accepted by the firm that inadequate training was provided for the partner relied on to comply with anti-money laundering regulations, and that funds were improperly transferred from a client ledger to discharge fees and disbursements.”
  • “In an agreed outcome published today, the Solicitors Regulation Authority said the financial penalty should be 0.25% of the firm’s £155m turnover – equating to £387,500 but reduced by 40% to take account of mitigating factors.”
  • “Mishcon de Reya said it cooperated with the SRA investigation and acknowledged its due diligence and training failings. New IT systems have been introduced with centralised record-keeping to prevent future similar breaches.”
  • “Following the outcome, a spokesperson for the firm said: ‘We are pleased to have come to a settlement with the SRA relating to two separate and historic investigations in relation to which we have made appropriate admissions. Mitigating factors such as our cooperation with the SRA throughout the investigations and the corrective action we have taken since to prevent a recurrence have been recognised by the SRA in reaching this outcome.'”

Other recent focus on Anti-money Laundering: “Law Society responds to Chatham House AML report” —

  • “The Law Society of England and Wales has issued a response to London-based thinktank Chatham House’s recent report criticising the UK’s anti-money laundering (AML) laws.”
  • “The report states that un-policed and often unenforceable anti-corruption laws have made the UK the global money-laundering capital for a post-Soviet Union elite, severely damaging Britain’s international reputation and the rule of law, and calls for new measures to constrain professional enablers.”
  • “The report also suggests that the Office for Professional Body Anti-Money Laundering Supervision found that 81% of the 22 professional bodies had not implemented an effective risk-based approach, and only one-third of them were effective in developing and recording adequate risk profiles for their sector.”
  • “A Law Society spokesperson responded: ‘Law firms already play an important and significant role in tackling money laundering. This is demonstrated by the substantial costs and resources allocated by the profession to complying with its AML and financial crime obligations, resulting in a substantial public benefit… It is widely recognised by the UK government, law enforcement, the regulator and the UK’s National Risk Assessment that the vast majority of the sector is trying its best to do the right thing. However, the legal sector cannot be complacent or naïve and must remain vigilant against the ever-changing threat of illicit finance.'”

See the Chatham House report.

In parallel, I noted the SRA promoting its recent article: “Money Laundering Governance: Three Pillars of Success” —

  • “Every person in a firm has a responsibility to make sure that it is not used for money laundering, and that relevant reports are made of any suspicious activity. MLCOs and MLROs form the keystone of the firm’s efforts. The success of the firm’s AML regime as a whole is likely to depend on suitably knowledgeable, skilled and authoritative people holding these roles.”
  • “Below, we set out what we consider to be the three main attributes a successful MLCO or MLRO should have:
    • Authority: The ability to command respect, to make decisions and to follow them to completion, and the ability to access and use all information held by the firm.
    • Independence: A focus on the firm’s legal obligations rather than short-term gain, the ability to make decisions without being influenced by other fee earners or by clients.
    • Resources: To be given the time and space to consider what the best course of action should be, to have provision, where possible, for a deputy to cover for them, and supportive colleagues.”