AML Articles, Tips & Latest News

In 2023, the Solicitors Regulation Authority (SRA) identified four emerging threats in the Sectoral Risk Assessment, one of which is Proliferation Financing. This relatively new concern, which covers the movement of funds or financial services to support the development, acquisition or distribution of weapons of mass destruction, poses particularly complex challenges for law firms, whose trusted client relationships and cross‑border transactions can be exploited to mask illicit finance or support.

Understanding the mechanics of money laundering is essential for any law firm. Criminals employ a variety of tactics to disguise the illicit origins of their funds, from layering via complex financial transactions to integrating funds through seemingly legitimate businesses. Among these, smurfing remains one of the most widely used methods within the placement stage; sums of cash are broken down into smaller transactions to make monitoring harder. 

To stay vigilant against financial crime such as money laundering and terrorist financing, law firms must take a risk-based approach towards the clients and matters that they deal with. “Know Your Customer” (KYC) encompasses a series of important checks and monitoring that legal professionals must undertake at the start of (and during) business relationships. 

As criminal activities become more sophisticated and harder to track, the risk of money laundering has become particularly rife in the UK. These ever present threats require proactive  vigilance from those within legal firms. 

Money laundering remains a significant concern for law firms in the UK, as criminals around the world seek to exploit legal services to legitimise illicit funds. In 2023/2024 alone, the SRA submitted 23 suspicious activity reports through the course of its own work, performed 237 proactive inspections, and brought enforcement action against 78 firms and individuals - representing the persistence of this issue.

According to the National Crime Agency (NCA), it is a realistic proposition that upwards of £100 billion is laundered through and within UK-registered corporate structures each year; a staggering statistic which puts the level of threat that money laundering creates into perspective. The layering stage of money laundering is perhaps one of the most elusive - where illicit funds are disguised through complex and seemingly legitimate financial transactions. 

For legal professionals, conducting “Know Your Customer” (KYC) checks are an essential component of Anti-Money Laundering (AML) compliance. These rigorous measures check a client’s identity by examining key information and documents about them, to assess the potential for their connection with financial crimes such as money laundering or terrorist financing.

Many legal professionals face common challenges when adhering to their AML obligations, and an issue of increasing concern is the potential for false positives - instances where legitimate transactions or information are flagged as suspicious.

To ensure a fair and transparent legal system, law firms conduct several rigorous checks at the start of a new business relationship, one of which is identifying the Ultimate Beneficial Owner (UBO). Identifying UBOs is important for firms when unravelling or unveiling hidden layers of corporate ownership, which has been a persistent issue for many solicitors up and down the country. From ensuring fair business practices to combating financial crimes like money laundering and tax evasion, UBOs are the key to unlocking more transparent client relationships.

Customer Due Diligence (CDD) is one of the most important proceedures for Anti-Money Laundering (AML) compliance, ensuring firms meet regulatory requirements while creating trust and transparency in client relationships. This process is crucial in mitigating risks, particularly for legal professionals who handle sensitive information and manage complex transactions on a daily basis.

Law firms regulated by the Solicitors Regulation Authority (SRA) have a legal obligation to comply with Anti-Money Laundering (AML) legislation, and a duty to follow additional best practice guidelines. However, some firms still do not have robust AML compliance programmes in place, putting the firm at risk of financial or reputational harm. 

Regulatory compliance in SRA-authorised (Solicitors Regulation Authority) firms is vital for ensuring ethical conduct, financial integrity, and risk management. These firms must meet stringent standards to protect clients' interests and uphold public trust in the legal profession, and to maintain these high standards, firms designate Compliance Officers for Legal Practice (COLPs) and Compliance Officers for Finance and Administration (COFAs) to oversee adherence to legal, ethical, and financial rules.

In this article, we will investigate how these roles are central to promoting transparency and accountability, safeguarding the firm’s reputation and integrity. 

Anti-money laundering (AML) checks are a critical aspect of legal practice, especially for solicitors who handle client transactions that may be vulnerable to misuse by those seeking to launder illicit funds. 

"Know Your Customer" (KYC) is an essential regulatory requirement for businesses, particularly within the legal and financial sectors, aimed at verifying the identity of clients to prevent illegal activities such as money laundering and terrorist financing. This guide provides a detailed overview of the KYC requirements in the UK for 2025, highlighting key aspects, regulations, and best practices.

A visit from the Solicitors Regulation Authority (SRA) can be a daunting prospect for many law firms, potentially causing a great deal of stress for those involved. These visits, usually referred to as “inspections”, often occur through desktop-based means, although they can involve actual visits. It is important to understand what happens during an SRA visit; this article will walk you through the process step by step, from initial notification, through to the final report, providing insights into what law firms can expect and how best to navigate this event.

MLRO (Money Laundering Reporting Officer) and MLCOs (Money Laundering Compliance Officer) are two roles set out in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, the MLR. 

Money laundering undermines financial systems, fuels organised crime and corrodes the integrity of economies worldwide, so knowing how to report potential cases of money laundering, by completing a document known as a “Suspicious Activity Report” (SAR), is essential in the fight against this financial crime. A lack of knowledge on how to report potential money laundering or improper documentation could lead to the crime failing to be prevented and could give rise to regulatory challenges for you and your firm. 

In the world of regulated services and anti-money laundering (AML), the term "Politically Exposed Person" (PEP) holds significant importance. A PEP is an individual who occupies a prominent public position, making them more susceptible to corruption and financial crimes, including money laundering and terrorist financing. Understanding who PEPs are, the risks they pose, and how financial firms manage these risks is crucial for maintaining the integrity of the global financial system.

The United Kingdom has a prescribed framework in place to combat money laundering and the financing of terrorism. Firms operating within various sectors are required to register with appropriate regulatory or supervisory bodies to ensure compliance with Anti-Money Laundering (AML) regulations. This article outlines the primary authorities that firms must register with for AML purposes in the UK and the specific obligations these registrations entail.

In today’s complex financial landscape, money laundering has emerged as a significant concern for governments, financial institutions and law enforcement agencies worldwide. This financial crime is estimated to cost the UK economy more than £100 billion each year, emphasising the need for businesses to be vigilant against money laundering. We all have a duty of care against financial crime, especially those within the legal sector.

It is incumbent upon firms in the legal sector to ensure that staff involved in financial transactions understand not only as to where a client obtained the funds for a transaction, but also how this relates to their overall wealth.

As law firms navigate the complexities of regulatory compliance, the role of the Money Laundering Reporting Officer (MLRO) stands as an anchor to verify the integrity and security of AML controls. Frequent reporting to the Board by the MLRO is an essential tool that supports monitoring of trends for risk, as well as providing an understanding of the efficacy and suitability of controls for AML, allowing the Board to make better informed decisions in real time.

Money laundering, or even the potential risk of money laundering remains a very real risk for firms operating within the legal sector. As you may have seen in the Law Gazette, in November 2023 Ashfords LLP (Ashfords Solicitors) were fined over £100,000 by the SRA for money laundering compliance failures, making it the fourth largest fine ever imposed by the SRA.

As of June 2023, the UK Government estimates that money laundering costs the UK economy more than £100bn every year. As a supervisory body, the Solicitors Regulation Authority (SRA) assigns dedicated resources to preventing and detecting money laundering. Part of that work includes conducting inspections of law firms to ensure suitable processes and controls are in place, providing guidance and support, or where necessary issuing fines for non compliance.

Firm-Wide Risk Assessments (FWRA) are a common area of regulatory non-compliance in legal practices. Many law firms draft FWRAs that fall short of the level of detail required, data sets and topics that need to be included. So widespread is the problem, that the SRA is including particular scrutiny of FWRAs as part of its ongoing campaign for AML thematic review visits to law firms around the UK.