SRA Springs Into Action, by Nick Dyoss

Last month saw the SRA publish their Risk Outlook for Spring 2015 which showed that little – in terms of the risks faced by firms – has changed much since their Autumn Update. The key areas of concern for the SRA remain bogus law firms, money laundering and the misuse of money or assets.

Some the figures associated with these issues are staggering.

In 2014 the SRA received over 700 reports of bogus firms which is the highest ever recorded. In 2013 the SRA received 548 reports about bogus law firms, up from 312 in 2012, so it is easy to see why bogus law firms are now seen as a real risk by the SRA to all sizes of law firms and should the rise in firms reported continue at the same rate in 2015 the figures will be near 1000.

Sadly this is reflected nationally across the whole economy with KPMG reporting a significant increase in fraud cases. There is little evidence to suggest that this trend will decline.

The SRA aim to visit 500 firms to audit their Anti-Money Laundering (AML) processes. Image copyright Images Money.

The SRA are now well into their assessment of a number of firms who are subject to the auditing of their current AML processes. They are aiming to visit 500 firms and their activity has been driven by an increase in reports concerning AML compliance – a handful of cases the likes of which they have not been seen before – as well as pressure from law enforcement agencies.

At a recent conference in March Steve Wilmott, Director of Intelligence and Investigation at the SRA, said that they will be looking at systems and procedures, record keeping, training and the activity of the MRLO at the firm. If they were to visit how confident would you be of passing their inspection?

Another area to feature in the Spring report is the misuse of money or assets.  The report revealed that things have changed little since Autumn with poor financial controls continuing to ‘provide opportunities for financial misconduct to occur.’

Within the update, the regulator states that they have seen recent cases where ‘poor systems and controls have been a factor in the misuse of money or assets’, citing that the root of the problem lies in inadequacies in training and supervision, as well as failure to control access to accounts.

So what can firms do to reduce these key risks? Well there is certainly quite a lot of information and service available which I will touch on.

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