The Solicitors Regulation Authority (SRA) has recently intensified its crackdown on law firms failing to comply with anti-money laundering (AML) regulations, imposing substantial fines on several firms for significant breaches. The regulatory body is signaling a firm stance against non-compliance, emphasizing the critical importance of robust AML frameworks within the legal sector. This increased enforcement reflects growing concerns about firms’ preparedness to manage money laundering risks effectively.
Overview of Recent Fines and Enforcement Actions
In the past six months alone, the SRA has issued 50 fines totaling approximately £575,000 to law firms for breaches of AML rules. These penalties highlight widespread deficiencies in compliance practices across the profession. According to SRA Chief Executive Paul Philip, many firms continue to exhibit “fairly basic deficiencies” in their AML arrangements, which often stem from a lack of familiarity with regulations or insufficient capacity to manage compliance effectively.
The SRA’s primary concerns include the absence of firm-wide risk assessments, inadequate policies, controls and procedures to mitigate money laundering and terrorist financing risks, and failures in conducting client and matter-specific risk assessments. These shortcomings increase the likelihood of firms inadvertently facilitating money laundering activities, threatening the integrity of the legal sector.
Examples of Notable AML Failures and Fines
Several high-profile cases demonstrate the range and severity of these breaches:
- Harrison Thames Valley Solicitors LLP, a Reading-based law firm, was fined £25,000 following an investigation that uncovered a six-year period of serious AML failures. The firm lacked adequate firm-wide risk assessments and compliant policies, controls, and procedures as required under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017). The fine was calculated as 1.6% of the firm’s annual domestic turnover. The firm was noted for cooperating fully with the investigation and promptly addressing its compliance gaps.
- Tyndallwoods Solicitors Limited faced one of the highest penalties, a fine of £27,813, due to widespread failures in AML risk assessment and compliance systems, reflecting long-term regulatory neglect.
- Smaller firms have also been fined significantly for lapses such as failure to maintain an independent audit function, not providing AML training to partners, weak ongoing monitoring of transactions, and failure to verify the source of funds from third parties. One firm received a £20,000 fine for omitting conveyancing—a high-risk area constituting 75% of its fee income—from its risk assessment.
- Other firms fined include Burch Phillips & Co, Gillespies, and Richards Thomas LLP, among others, with penalties ranging from a few hundred pounds to tens of thousands depending on the scope and severity of the breaches.
Common Areas of Non-Compliance
The SRA’s enforcement actions reveal several recurring compliance failures:
- Lack of Firm-wide AML Risk Assessments
Many firms do not have a comprehensive, documented risk assessment to identify and evaluate the firm’s overall exposure to money laundering risks. This is a fundamental requirement under Regulation 18 of the MLRs 2017 and critical for targeted risk mitigation. - Inadequate AML Policies, Controls, and Procedures
Firms frequently lack the necessary internal policies or fail to implement proper controls to manage risks. This includes insufficient due diligence processes and ineffective monitoring to detect suspicious activity. - Failing to Conduct Client and Matter Risk Assessments
Understanding specific risks posed by individual clients and matters is essential for proper AML management. Omission of this step often results in undetected vulnerabilities. - Poor Training and Awareness
AML training must be provided to all relevant staff, including partners and senior management responsible for AML oversight. Many firms have failed to deliver adequate training or establish an independent audit function to ensure ongoing compliance. - Failure to Notify the SRA of Compliance Officer Changes
Regulatory obligations require firms to notify the SRA whenever there is a change in their Compliance Officer for Legal Practice (COLP) or Compliance Officer for Finance and Administration (COFA). Neglecting this duty has also resulted in fines.
Regulatory Intent and Future Outlook
The SRA’s sustained enforcement efforts underline an intent to “ratchet up the consequences” for law firms conspicuously failing to comply. Mr. Philip emphasized that many breaches are likely unintentional, often due to smaller firms being unaware or lacking capacity. Still, the absence of essential compliance mechanisms such as risk assessments increases the probability of enabling money laundering.
The SRA aims to conduct 700 AML inspections of law firms by October 2025, with 297 already completed in the first four months of the current year—a figure exceeding targets by 128%. New data-gathering exercises are planned to improve the regulator’s understanding of the AML risk landscape and to better allocate inspection resources using advanced machine learning technology.
There is also ongoing discussion about the future of AML supervision in the UK legal sector, with options including an enhanced supervisory body or a single supervisor role, possibly assigned to the SRA.
Impact on Law Firms and Recommendations
For law firms, the intensified scrutiny serves as a critical warning to urgently enhance AML compliance frameworks. Key measures recommended include:
- Conduct Comprehensive AML Risk Assessments
Firms must prepare and regularly update detailed firm-wide risk assessments, as well as client and matter-specific evaluations. - Implement Robust AML Policies and Controls
Establish clear and effective policies, internal controls, and procedures aligned with regulatory requirements to address money laundering risks. - Deliver Continuous AML Training
Ensure staff at all levels receive ongoing AML training to remain vigilant against emerging threats and to understand their reporting responsibilities. - Maintain Transparent Compliance Communications
Notify the SRA promptly regarding any key changes, particularly compliance officer appointments or departures. - Actively Address Compliance Gaps
Proactive remediation of identified weaknesses before regulatory inspections or enforcement actions can mitigate financial penalties and reputational harm.
Conclusion
The SRA’s recent enforcement activity represents a decisive step to uphold the integrity of the legal profession by combating money laundering risks proactively. With substantial fines imposed on law firms for failures in risk assessment and compliance controls, the message is clear: firms must treat AML obligations with the utmost seriousness to avoid regulatory penalties and safeguard public trust.
Law firms should view these developments as an opportunity to strengthen their anti-money laundering regimes and demonstrate their commitment to legal and ethical standards in 2025 and beyond.
AML Editor’s article was originally published in law360 on August, 12, 2025