What SRA AML Reviews Can Teach Law Firms About Their Own Controls

AML supervision should not be viewed purely as an exercise in demonstrating that policies exist.

The more useful question is whether those policies operate effectively when applied to real clients and real matters.

Regulatory reviews of law firms repeatedly highlight the importance of practical implementation across areas such as:

• client and matter risk assessment
• source of funds and source of wealth
• ongoing monitoring
• documentation of decisions
• appropriate escalation
• consistency between written procedures and actual practice

A technically comprehensive AML policy therefore provides limited comfort if the operational process underneath it does not consistently produce good decisions.

Review your own files as a reviewer would

Firms should periodically test their own files from the perspective of an external reviewer. Ask:

• Could another experienced professional understand why this client was accepted?
• Could they identify the risks considered?
• Could they see what mitigated those risks?
• Could they understand who approved the decision and why?

If the answer is unclear, the weakness may not be the underlying decision.

It may be the process used to evidence it.

Note on sources: This article describes themes commonly discussed in legal-sector AML supervision. It does not attribute any statistic, finding or statement to the SRA. Verify all regulatory statements against current SRA publications before relying on them.