SRA’s Latest Sanction Guidance: Key Takeaways For The Law Firms

Have you received the sanction advice letter from the Solicitors Regulation Authority?

Earlier this year, the Solicitors Regulation Authority (SRA) issued warning letters to over 1,000 firms to conduct firm-wide sanction risk assessment.

This highlighted how essential it is for institutions to stay up to date on SRA sanctions and make sure that their procedures comply with the most recent UK sanction guidelines and regulatory standards.

What Is Sanction In The AML World?

AML sanctions are restrictions imposed by regulatory authorities or governments to limit business trade, financial deals, connections, and investments with individuals, entities, or nations who could be a serious threat to human rights, safe financial spaces, national security, and foreign dealings.

Despite being largely employed as a political tactic, these sanctions have a big impact on financial firms’ duties to stop illicit financing and comply with anti-money laundering regulations.

What Is The SRA’s Latest Guidance For Legal Professionals?

The Solicitors Regulation Authority (SRA) has released updated guidelines for legal professionals to comply with UK sanctions, emphasizing the importance of strict AML measures and Sanctions screening tools.

This upgrade, formally issued on 5 August 2024, includes major modifications to enhance the effectiveness of sanctions enforcement in mitigating money laundering and terrorist financing.

What’s The Reason For This Update?

SRA issued a new set of guidelines to make sure:

• Law firms and solicitors are fully compliant with the UK’s financial sanctions regime.
• Prevent firms from inadvertently aiding in financial crimes by working with designated persons or entities under sanctions.
• Emphasize the importance of proper due diligence, comprehensive AML compliance policies, and the use of effective screening tools to avoid penalties and uphold the integrity of the legal profession.

 

Major Modifications in the Sanctions Regime

The revised guidelines under the SRA sanctions list have several noteworthy improvements:

Improved Screening Requirements

The new update emphasizes thoroughly screening customers and monitoring transactions against updated global sanctions lists.

Incorporating regular updates and real-time monitoring ensures the latest data is used.

Evaluate & Record Sanctions Risks:

Make a thorough evaluation of the sanctions risks that your company is exposed to.

Determine which customers or areas of business are more vulnerable to sanctions violations then adopt related mitigation techniques to successfully manage these risks.

Solicitors must keep track of the sanctions risk assessments they have completed for each case, to emphasize any findings that point to higher risk and implement the necessary mitigating measures.

Prohibitions of Operating with Designated Individuals

Business dealing with financial businesses or individuals that have been penalized with hefty fines and are included in sanctions lists is legally banned.

Significance of Enhanced Due Diligence

SRA-Solicitors Regulation Authority mandates to perform enhanced due diligence for their customers, in addition to risk assessments of sanctioned entities.

Sanction checks can be carried out by integrating advanced tools that can effectively screen customers and their transactions.

It further highlights that relying on manual checks and outdated methods/systems and databases in today’s advanced regulatory environment is not sufficient.

Identifying Red Flags

The notice lists several warning signs or red flags that firms should notice, such as financial organizations breaching the financial sanctions by involving themselves with sanctioned entities, exhibiting unusual transaction patterns, and being unable to provide complete information.

When firms find out that the financial business operates with high-risk jurisdiction and violates the legally suggested controls. In that case, they must self-report the suspicious activities and conduct staff screening during onboarding.

Integrating Sanctions Compliance Policies

Financial organizations must develop and follow sanction compliance strategies. These guidelines must be thoroughly updated and recorded to incorporate the latest modifications in regulations.

The risk-based approach must be used to enhance AML compliance and examine the areas where sanction violations are more likely.

Obligations under law & RISK Assessment

Firms must follow the legal requirements according to the revised financial sanction regime to fully comply with AML regulations.

They must also conduct risk assessments to identify sanctioned businesses or individuals and take relevant actions to manage associated risks.

The Requirement of  Sanctions Screening

As stated in the report, the UK sanctions regime highlighted the necessity of using sanctions screening tools. As part of the customer onboarding process, SRA has explicitly stated that conducting sanction screening is an undeniable part of the process.

Businesses should screen against the UK sanctions list by using digital screening tools that can help perform this operation.

The sanction screening tools must assist businesses in avoiding contact with designated individuals. The Guidelines advise taking into account the following measures:

Update Timeline

How frequently is the global sanctions data updated? It’s best to use data that is updated daily.

Databases of Sanctions

Which databases are consulted? Are all pertinent geographic areas covered by these?

Names Variation

How does the technology translate names from different scripts or handle variations in name spelling from other languages?

Match Confidence

What is the degree of confidence for partial, potential, “fuzzy”, or true matches, and is it modifiable?

Jurisdictional Coverage

Are all important jurisdictions for your business covered, and how often are these listings updated?

Beneficial Ownership

How are beneficial ownership and shell company operations screened and controlled by the tool?

In response to the recent update by the SRA, there exists a continuous necessity for strong AML compliance measures including Sanctions screening to combat money laundering and terrorist financing. Legal professionals can ensure they can follow the sanctions regime plan as described and perform all obligations accordingly.

AML Watcher offers a sanction screening solution strategically designed to address the challenge of the relevance of sanction compliance. In addition to a consolidated list of sanctioned entities, it also offers customizable risk levels and targeted AML screening based on jurisdiction requirements.

AML Watcher makes it easy for businesses to understand and comply with the most recent SRA recommendations as well as the  UK sanctions regime.

AML Watcher helps you handle the increased due diligence mandated by the new SRA sanctions criteria by integrating thorough PEP, Sanction, and Watchlist screening.

This proactive strategy helps businesses protect themselves from expensive fines and reputational harm, by preventing any violations and making sure that your AML compliance procedures are always in line with the most recent regulatory requirements.

In a world where geopolitical dynamics are constantly shifting and the relevance of data is just as important as its breadth, our Sanctions screening solution ensures global AML compliance with emerging regulatory changes.