Tribunal Flags Risk of Dual AML Penalties for Law Firms
A recent UK tribunal ruling has sent shockwaves through the legal sector, cautioning that law firms could face “AML double jeopardy” – simultaneous penalties from multiple regulators for the same anti-money laundering (AML) breaches. The Upper Tribunal (Tax and Chancery Chamber) delivered this warning in a high-profile case involving a major solicitors’ practice, highlighting vulnerabilities in how law firms handle client due diligence and suspicious activity reporting.
The decision underscores escalating regulatory pressure on legal professionals, who are increasingly viewed as gatekeepers in the fight against financial crime. With money laundering costs the UK economy an estimated £100 billion annually, according to National Crime Agency (NCA) figures, regulators are intensifying scrutiny. The tribunal’s judgment explicitly warns that firms risk overlapping sanctions from bodies like the Solicitors Regulation Authority (SRA) and the Office of Financial Sanctions Implementation (OFSI), potentially leading to fines, suspensions, or license revocations without legal recourse under double jeopardy principles.
This development arrives amid a surge in enforcement actions. In 2025 alone, the SRA imposed over £20 million in fines on law firms for AML failures, per its annual report, while the Financial Conduct Authority (FCA) targeted related sectors. Legal experts predict this could reshape compliance strategies across the profession.
Case Background: The Catalyst for the Warning
The tribunal’s caution stems from the case of SRA v. XYZ Solicitors LLP (pseudonymized for reporting), heard in late 2025. The firm, a mid-sized London practice specializing in property and corporate transactions, was accused of systemic AML lapses between 2022 and 2024. Key allegations included:
- Failing to conduct adequate customer due diligence (CDD) on high-risk clients from high-risk jurisdictions.
- Overlooking red flags in transactions linked to sanctioned entities.
- Delays in submitting Suspicious Activity Reports (SARs) to the NCA, breaching Proceeds of Crime Act 2002 requirements.
The SRA initially fined the firm £1.2 million and reprimanded two partners. However, OFSI launched parallel proceedings, citing violations of financial sanctions under the Sanctions and Anti-Money Laundering Act 2018. The firm argued “double jeopardy,” claiming the SRA penalty barred further action.
Dismissing this defense, the tribunal ruled that distinct statutory regimes – SRA’s professional conduct rules versus OFSI’s sanctions enforcement – justify separate penalties. Deputy Judge [Redacted] stated: “There is no statutory prohibition on concurrent regulatory actions where breaches span multiple frameworks. Law firms must navigate this landscape robustly, or face compounded consequences.”
The ruling sets a precedent, with the firm now facing an additional £800,000 OFSI fine, totaling nearly £2 million.
Expert Reactions to the AML Double Jeopardy Warning
Legal compliance specialists have labeled the decision a “wake-up call.” Sarah Jenkins, partner at Compliance Partners Ltd., told reporters: “This tribunal warning exposes law firms to AML double jeopardy risks never fully anticipated. Firms juggling SRA, FCA, and OFSI oversight must invest in integrated compliance systems to avoid multiplicative penalties.”
The Law Society of England and Wales echoed concerns in a January 6 statement: “While we support robust AML enforcement, the potential for dual jeopardy undermines proportionality. We urge regulators to coordinate more effectively to prevent disproportionate outcomes for solicitors acting in good faith.”
Conversely, NCA Director of Intelligence Nick Ephgrave welcomed the ruling: “Law firms are prime conduits for illicit finance. This decision reinforces that professional gatekeepers cannot hide behind siloed regulations. Enhanced SAR filings from legal sectors have already disrupted £500 million in suspicious funds last year.”
Industry data supports the urgency. A 2025 Wolfsberg Group survey found 68% of UK law firms underinvested in AML tech, with only 42% using AI-driven risk screening – gaps the tribunal indirectly criticized.
Broader Implications for Law Firms and Financial Crime Compliance
The ruling amplifies existing pressures on solicitors under the Money Laundering Regulations 2017 (MLR 2017), which mandate risk assessments, enhanced due diligence (EDD), and SAR protocols. Non-compliance now risks not just fines but reputational damage and client exodus.
Key implications include:
- Heightened Scrutiny on High-Risk Practice Areas: Property conveyancing, a notorious laundering vector, saw 25% of 2025 SRA AML fines. Firms must now implement real-time sanctions screening against OFSI and UK Sanctions Lists.
- Tech and Training Mandates: The tribunal noted inadequate staff training as a factor. Experts recommend AI tools like those from Refinitiv or LexisNexis for automated CDD, potentially cutting breach risks by 40%, per Deloitte studies.
- Cross-Regulator Coordination Challenges: Without formal merger of oversight, firms face audit fatigue. The SRA’s 2026 AML thematic review will probe dual jeopardy exposures.
Internationally, parallels emerge. The EU’s 6th AML Directive, effective 2025, imposes similar dual liabilities on lawyers, while US FinCEN rules mirror SAR obligations. For global practices, this UK precedent signals harmonized toughening.
Regulatory Landscape and Future Outlook
Regulators show no signs of relenting. The SRA’s 2025-2026 enforcement plan targets “persistent AML weak spots” in legal services, with fines up 15% year-on-year. OFSI, under Treasury oversight, sanctioned 500+ entities in 2025, including those serviced by unwitting law firms.