We know it may be a daunting prospect, but effective planning and preparation can make a stressful experience easier to navigate.

The SRA is the regulator responsible for ensuring solicitors and regulated firms comply with the MLR 2017. While the regulator’s expectations and activities are often criticised as over-burdensome and frustrating, it can help senior law staff in particular to bear a couple of key points in mind.

First, the driving force behind increasing regulation is to protect the public, maintain the integrity of the solicitor’s profession, and ensure best practices are followed. Solicitors have a major role to play in deterring money launderers and other criminals in making sure they have effective systems and controls in place.

Secondly, the SRA has reassured firms that just because it is paying a visit, that does not necessarily mean it considers your firm to be at high risk of being targeted by money launderers.

On notice

Unsurprisingly more high-risk firms are visited than low to medium risk, but any firm to be subjected to an inspection will be given one to two week’s written notice. They are usually on-site and take around five hours.

The SRA will ask you send various documents ahead of the review, the firm’s AML risk assessment, AML policies and procedures and associated specified documents. It will also request a list of any open matters the firm has identified as high risk; and matter lists so that the regulator can select files for review.

On inspection day:

The MLCO and MLRO and two fee earners will be interviewed.
A sample of the firm's open and closed files together with the client ledgers will be reviewed.
A copy of any SARs or defence against money laundering (DAML) the firm has submitted to the NCA on site will be reviewed.

Following an inspection, the SRA may choose to issue guidance, letters of engagement, implement a compliance plan or refer non-compliant firms for investigation. An investigation could lead to regulatory sanctions.

Higher penalties

The level and rates of SRA investigations, and the regulator’s readiness to issue higher than ever financial penalties, have reached unprecedented levels. The Economic Crime and Corporate Transparency Act 2023 (ECCTA) gives the SRA unlimited fining powers to sanction certain breaches that involve economic crime.

Meanwhile, it is focusing increasingly on assessing and mitigating risk. In its latest Anti-Money Laundering Annual Report 2023-24, the SRA said it submitted 23 suspicious activity reports, performed 237 proactive inspections and 258 desk-based reviews, and brought enforcement action against a combined total of 78 firms and individuals.

It plans to reinforce the importance of AML compliance and take enforcement action when necessary. In the year ahead, its focus will include helping firms implement strong preventative controls, publish guidance and bespoke advice following proactive reviews and monitor those areas.

The SRA’s report also makes very clear that AML training is “a first line of defence”; “one of the most effective controls against fee earners and firms becoming inadvertently involved in money laundering”. It also published a thematic review into the AML training of relevant employees which firm leaders should be aware of.

In our SRA Webinar Bundle, delegates will be guided as to what firms should look out for when the ‘inspector’ comes calling, and the areas of compliance to focus on. View the bundle here.