SRA WARNING NOTICE of 16 OCT 2023 re AML & Sanctions: Client and Matter Risk Assessments

Wayne Williams LLB MBA 19-10-2023

Cpm21 has been warning firms for some time that they must prioritise their AML & Sanctions Compliance. We have also warned that the likelihood of an onsite SRA AML audit is increasing.

I attended the SRA’s COLP and COFA conference at Birmingham on the 18th of October 2023. It is clear that what we have warned firms of is correct. The SRA has also now completed a number of SANCTIONS screening audits and is about to roll these out too across England & Wales.

It is essential that all firms now take note of the SRA’s warning notice on failure to conduct adequate Due Diligence and Client and Matter Risk Assessments in the context of AML and Sanctions Compliance.

Failure to comply with this warning notice could lead in the words of the SRA: to disciplinary action, criminal prosecution, or both.

There was a clear message at Birmingham that the SRA will now levy fines on firms, individuals and partners (not just the MLCO) of a firm for failures in AML and Sanctions compliance.  Some could find themselves before the Solicitors Disciplinary Tribunal.

We would implore firms to take steps now to ensure that their AML & Sanctions Practice Wide Risk Assessments PWRA’s (including Proliferation Financing) are up to date and that their AML, Sanctions and Proliferation Financing Policies Controls & Procedures (PCPs) are in effective operation with ALL Fee Earners for ALL Clients and on ALL Matter Files across your firm. You literally cannot afford to have a “weakest link”.  All Heads of Department should be involved in the PWRA exercise.

Also ensure that there is good communication of your PCPs to all staff and that your training records show up-to-date and recent training of ALL STAFF. This should include training of your staff about the risks identified in your PWRA’s and provides them with a clear understanding of YOUR firm’s AML & Sanctions PCPs and what you require staff to do to comply with your tailored PCPs and the Money Laundering Regulations. It is not really sufficient to send them on a course or get them to watch an online webinar.

To help you understand the required scope and scale of client and matter INITIAL and ONGOING CDD the SRA has also published for the first time an AML/Sanctions Client and Matter Risk Assessment(C&MRA) Template.

There cannot be a tick-box approach to this area of compliance.

Your systems need to be REAL and ROBUST, and you should monitor their implementation through your normal regular monthly file reviews but the question on the file review form should change from

  • “Has a Client and Matter Risk Assessment Form been completed to
  • “Has the conducting Fee Earner fully and adequately completed the AML/Sanctions C&MRA in the context of this particular client and this particular matter both at the outset and ongoing”.
  • Is the RISK appropriately classified by the Fee Earner?
  • Should the Fee Earner have conducted Enhanced Due Diligence for any reason?

You should also consider conducting an independent AML and Sanctions audit either internally across functions or using an external firm like cpm21.

Also remember to check and document the MLCO’s review of any third party CDD software (e.g. Thirdfort; Credas; Infotrack etc) that you use to evidence that it is fit for purpose within the context of your firm e.g. how current is the information produced as to whether the client is a Designated Person under Sanctions Regulations. Is the OFSI consolidated list search used (in accordance with your PCPs and Sanctions Policy) by departments that perhaps do not use the above EID&V system.

MLCOs. MLRO’s, COLPs and other Senior Managers must take the time out to do this properly, however busy they may be with their fee earning and other duties.

Do not delay.

Act now.

Please contact us if you need help.