Are you ready for an SRA AML audit?

In the last month alone, six firms we work with have been the subject of SRA AML audits.  One had a ‘desktop’ audit’, the others have had on-site inspections.  The SRA is currently recruiting more AML auditors, so there are a lot more audits coming down the track.

Would you be ready for an AML Audit?

Receipt of the SRA’s letter and AML Questionnaire almost always strikes panic into COLPs and MLROs, so we advise you to prepare now and ensure that your AML documentation is accurate and up-to-date and that your AML Policy is implemented effectively across the firm.

Conduct an independent AML audit

We set out guidance and actions to take to prepare your practice for an AML audit, but if you’re resource-poor and time-strapped, please do get in touch as a first step – having an independent AML audit may be the best option for your firm.  We will conduct a thorough, independent review of your anti-money laundering (AML) policies, procedures, and controls to ensure they comply with legal and regulatory requirements.

What does the SRA AML Questionnaire ask for?

The SRA AML Questionnaire asks for a range of information about the firm and for specified documents within 14 days of receipt of the letter.

Requested information includes:

• Details of the firm’s geographic location, personnel and services offered
• When the firm’s Practice Wide Risk Assessment and AML Policy were first drafted and last updated (in accordance with regs 18 and 19 MLR 2017)
• Whether the firm’s AML policies, controls and procedures have been independently audited (in accordance with reg 21 MLR 2017)

What documents do the SRA ask for when conducting an AML audit?

• The firm’s Practice Wide Risk Assessment and AML Policy as at the date of receipt of the SRA’s letter, including supporting documents such as separate source of wealth/funds questionnaires
• Template client/matter risk assessment
• Copies of any independent audit reports including recommendations and follow-up action
• AML-related training records
• A list of high risk matters
• A full matter listing

What happens at the SRA inspection?

• An interview with the MLCO and MLRO. The SRA allow 3 hours for these interviews, although they are typically 1.5 to 2 hours.
• Interviews with other members of staff (selected in advance)
• Review of a small number of matter files (selected by the auditor).

What do matter files need to display to satisfy AML audit criteria?

For each file selected, firms are asked to provide:

• A brief summary of the transaction (including the name of the fee earner, whether it is a new or existing client and where appropriate, how it was funded and the value of the transaction)
• Client care letter
• Client ledger
• All Customer Due Diligence documents completed at the outset including but not limited to:
  
  o    ID and verification documents
  o    any e-verification documents
  o    search engine or adverse media checks
  o    any company searches or similar registry checks
  o    evidence of source of funds, source of wealth checks and any additional enquiries made relating to source and funds/wealth if applicable
  o    client/matter risk assessment

How can I prepare my firm for an SRA AML Audit?

1. The starting point is your Practice Wide Risk Assessment (reg. 18 MLR 2017). Have you reviewed it recently? Is it bespoke to your firm? Does it identify all relevant risks and mitigations? Does it address sanctions and proliferation financing risks?
   
   
2. Review your AML Policy (reg. 19 MLR 2017). Does it comply with the Legal Sector Affinity Group’s Guidance published in 2023? Is it driven by the PWRA?
   
   
3. We recommend that MLROs carry out regular mini audits or spot checks of files to assess correct application of AML compliance
   
   
4. Ensure your firm’s training records are up-to-date and that you can evidence the content as well as the date of AML training
   
   
5. Consider an independent audit (reg.21 MLR 2017). This will provide a level of reassurance and recommendations for improvement.

If you need help with any other this, including reviewing your PWRA and AML Policy or an independent AML audit, we are here to help and support you.