The latest AML rumblings from the SRA
Anne Austin
Director
The scale of the SRA’s fines against law firms that can’t provide fully a compliant Practice Wide Risk Assessment (PWRA) or AML Policies, Controls and Procedures (PCP) continues to be a major concern, especially for smaller firms that feel unfairly targeted.
One of the most recent cases to hit the headlines is that of Birkenhead firm, Wolf Law Solicitors Ltd. On 19 March 2025 the SRA published a Regulatory Settlement Agreement with the firm, fining them £5,215 plus costs of £1,350.
So what had Wolf Law Solicitors Ltd done wrong?
Notably, one of the files reviewed by the SRA inspector involved the risk of proliferation financing (which the fee earner missed).
The firm had been instructed to draft a contract for the shipment of 25,000 metric tonnes of fertiliser from Peru to New Orleans, for sale to an American company. The fee earner had not recognised that fertiliser is categorised as ‘dual use’, as it can be transformed for military or terrorist purposes. The supply, purchase or sale of ‘dual use goods’ is a potential indicator of Proliferation Financing, which in itself can present a higher risk of money laundering or terrorist financing. Consequently, enhanced due diligence was required, but there was no ID for the company directors on file, no enhanced due diligence, nor evidence of ongoing monitoring. Also, £178,290.40 was received into the firm’s client account by way of deposit from the American purchaser without any checks on the source of the funds, nor any legitimate reason for holding the money in the firm’s client account.
Recommended actions to take to be ready for an AML Inspection
In our view, the best way to deal with worries over a possible AML inspection is to take control and be prepared:
- Review your PWRA and AML Policy against the Money Laundering Regulations 2017, as amended, the LSAG Guidance 2023 and the SRA’s various Guidance notes, and ensure they are up-to-date
- Gather together all former versions of your PWRA and AML PCPs (including template CMRAs) and store them in a separate folder. The SRA will ask to see them if your firm is selected for inspection. Reg.18(4) requires firms to keep an up-to-date record in writing of all the steps taken to identify and assess the risks of money laundering and terrorist financing to which the practice is subject, including the PWRA and any CMRAs. Under Reg.28(16) you must be able to provide the risk assessment, the information on which that risk assessment was based and your records to your supervisory authority on request.
- Ensure that there is a properly completed, compliant Client and Matter Risk Assessment (CMRA) on every file in scope (we’re hearing of many firms receiving SRA Compliance Plans requiring them to review every file and confirm that each one has a compliant CMRA within a fairly short time period)
- Check that there is robust source of funds and wealth evidence on every relevant file. Give your fee earners confidence to challenge a client’s explanation of their source of funds and to ask for more evidence if they are not satisfied. And if they (or you) still have doubts, listen to your gut and decline to act
- Train your team and keep a record of all training, including the content. This is not a ‘sheep dipping’ process! On the contrary, make the training interesting and relevant to the type of work your team does, and ensure that everyone understands the firm’s processes, including how to complete the CMRA effectively and compliantly
- Consider arranging an independent AML audit. Most firms are required to do this under Reg. 21, and it’s a great way of gaining an independent view of your AML documents, files and fee earner understanding, with practical advice on putting things right.
Help! We've been selected for inspection!
If you’ve received a letter from the SRA and need help preparing for an inspection – or if you simply want to be prepared for an inspection – please do get in touch.