New Solicitors Regulation Authority guidance on firm-wide sanctions risk Assessments

On 23 January 2024 the SRA issued new guidance on firm-wide sanctions risk assessments to identify and mitigate potential risks.

This risk assessment should feed into the firm’s sanctions policies, controls and procedures, and fee earners should consult it if needed when assessing client and matter risk.  The guidance can be read in full here.

Does a legal firm have to carry out a firmwide sanctions risk assessment?

A firm wide sanctions risk assessment is not a legal or regulatory requirement. However, the SRA ‘strongly recommends’ that all law firms should have one, so be prepared to justify why your firm doesn’t have one if selected for SRA audit.

The Office for Financial Sanctions Implementation (OFSI) has also indicated that, whilst the sanctions regime is strict liability, their enforcement policy will be risk-based. Having a firm wide sanctions risk assessment, with a sanctions policy, controls and procedures, backed up by appropriate training, would be treated as a significant mitigation in the event of a breach.

What should a firmwide sanctions risk assessment include?

SRA Guidance advises firms to assess sanctions risk against the same risk factors required by MLR2017, tailoring the document to their firm, its clients, geographic base, delivery channels and transactions, whilst taking into other factors such as the size of the firm, the number and qualification of its personnel, and its supervision structures.

Has the SRA published a template risk assessment that our law firm can use?

Yes, the SRA have published a template risk assessment, but have cautioned firms to ensure, if using it, that their assessment is tailored to reflect their firm’s risk profile, services and client demographic.

Firms within scope of the Money Laundering Regulations should consider whether they can integrate a sanctions risk assessment into their existing AML firm wide risk assessment and (at matter level) their client and matter risk assessment. 

A note of caution: whilst there will be overlaps, you will need to incorporate additional sanctions-specific questions and criteria.  If you’re unsure, we can help.