SRA Announces New AML Regulations 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 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

SRA revised guidelines have a number of 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.

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• It further highlights that relying on manual checks and outdated methods/systems and databases in today’s advanced regulatory environment is not sufficient.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

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• 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 to conduct sanction screening as 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.

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 relevance of sanctions compliance. In addition to a consolidated list of sanctioned entities, it also offers customizable risk levels and targeted screening based on jurisdiction requirements.