The top four regulatory concerns identified by the conference audience were:

• AML
• Sanctions
• Risk assessments
• Implications of the Economic Crime and Corporate Transparency Act 2023

Julie Norris’ opening session tackled several of these in an utterly relevant and engaging session, disproving the lie that risk and compliance is necessarily dry or worthy!

AML update

Nationally and internationally, AML has continued to climb as a priority topic for governments and therefore regulators. SRA AML-focused inspections have risen significantly in the last 5-10 years (163 in 2021/22, with a further 103 risk-based assessments undertaken). Enforcement actions (and fines) have risen commensurately, with 9 enforcement actions in 2019/20, 51 in 2021/22 and a further 47 in 2022/23.

Two chinks of light have emerged from the regulatory gloom:

• A breach of the AML regulations does not automatically infer a breach of the SRA Handbook (findings of SDT case against Dentons: Case ref 12476 – subject to SRA appeal).
• The SRA must prove that a breach of the AML regulations is sufficiently serious

The irony that the SRA is being required to take a more ‘risk-based approach’ to its regulation of the profession may not be lost on you.

Essential reading:

• Updated guidance on inspections: in a policy shift, the SRA are no longer interviewing fee earners in AML inspections (except in the largest firms).
• Updated sectoral risk assessment (March 2024): Domestic PEPs are considered inherently lower risk than non-domestic PEPs. NB the FCA guidance on this topic has been delayed in consequence of the General Election.
• Warning Notice on missing client money (June 2024): your firm’s policies may require updating to take account of the changed requirement – to repay missing client money ‘immediately’ as opposed to ‘promptly’ regardless of the reason (and the firm’s culpability) for the shortfall.

Look out for:

• Results from the thematic review on AML training: in the meantime, check that your own training records are up to date and comprehensive. The SRA will be inspecting these.
• Upcoming consultation on reform of AML supervision: Be aware of potential changes to Enhanced Due Diligence requirements.

Economic Crime and Corporate Transparency Act 2023

ECCTA 2023 brought with it the first change to criminal liability for many years, according to Norris. Section 196 of the Act introduces a statutory basis for corporate liability in cases of economic crime. It applies to senior managers acting in the scope (or perceived scope) of their authority. It applies to all firms and has extra-territorial reach.

Section 199 addresses the offence of failing to prevent fraud. When the provision comes into force, it will apply to large firms (using the Companies Act definition of large firms) which includes all top 100 law firms currently.

ECCTA will also remove the limit on the financial penalties that the SRA can impose on firms. There will be two new penalty bands introduced – and the bands have revised more descriptive indicators.

Action points for firms

• Identify who your senior managers are
• Ensure that your management screening is thorough and meaningful
• Review your training and monitoring of senior managers
• Document your relevant procedures such as your risk assessment, whistleblowing policy, reporting lines, training and monitoring

Norris’ session also looked at conduct in litigation as an increasing area of focus from regulators. The latest warning notice on SLAPPS identifies an obligation to check whether a case has merit, and whether it is appropriate to act.

Look out for future articles from Miller on

• Litigation funding
• Sanctions
• Risk assessment

Or contact your Miller representative or our Risk Manager, Calum MacLean to discuss specific queries.