AML: Mountain of red tape
The “punitive” fining regime for anti-money laundering (AML) rule breaches operated by the Solicitors Regulation Authority (SRA) has left lawyers feeling “fearful”, it has been claimed.
Launching a campaign against the “mountain of red tape suffocating conveyancing”, the Property Lawyers Alliance (PLA) said the “oppressive AML regime” had “driven the profession’s trust in the SRA to an all-time low”.
The PLA said fines for small to medium-sized law firms had ranged from £12,000 to £120,000, and were “significantly higher” for the largest firms.
“Even firms that have worked hard to do their best to comply with the rules, if found wanting, are still fined, even where there is no evidence that any AML offences have been committed.
“This oppressive AML regime, so resented by solicitors, has driven the profession’s trust in the SRA to an all-time low.”
Much of the SRA’s AML work is driven by government demands and is overseen by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), part of the Financial Conduct Authority.
The PLA, formed last year over the furore about the Law Society’s TA6 property information form, observed that OPBAS believed the SRA and other supervisors should go “even further with their enforcement of AML controls, a prospect that fills property lawyers with dread and prompts many of them to say, ‘enough is enough’”.
It said the “vast panoply” of AML guidance notes, laws, regulations and sanctions in conveyancing represented “a serious impediment to the efficient working of the UK property market”.
It estimated that this all exceeded 1,500 pages in length.
“Property lawyers must acquire in-depth working knowledge of AML laws and regulations via extensive, regular training, which detracts from their core legal practice.
“They must also ensure their staff receive training. Property lawyers must devote significant amounts of their precious time to creating and updating written AML policies, procedures, and other mechanisms (AML controls) and verifying, recording, evaluating, and reporting on evidence gathered in compliance with AML controls.”
The PLA said there was “no remuneration” for this mandatory activity and, for small and medium law firms in particular, the burden of compliance was “crippling” and took up “a disproportionate share of a law firm’s resources”.
All law firms were required to have an independent audit of their AML controls, creating a “whole new industry” of compliance experts.
“The resources required to commission an independent audit for a small law firm with, say, three partners, are typically in the region of £3,000. In addition, days of otherwise productive fee-earning time must be dedicated to the audit.
“This extraordinary expense is on top of the regular costs of necessary training and the time spent implementing AML laws and regulations.”
The PLA said the AML regime had reached the point where it was “choking” conveyancing.
“Since the early days of just needing to verify a party’s identity, requirements have snowballed, way beyond all reasonable measures.”
The PLA went on: “The government is openly critical of how long conveyancing takes, so it claims it will ‘speed up’ the home moving process, using law tech products and facilitating greater ‘digitalisation’.
“However, when excessive, government-imposed AML and sanctions obligations are at the root of so much of the delays experienced in conveyancing, it is little wonder that property lawyers across the country are angry.”
The PLA said not only were clients “unhappy about the intrusive investigations and the time and additional costs involved in their lawyers having to comply with AML controls, but they become irritated that they are ‘made to feel like criminals’. It hugely undermines the relationship between a solicitor and their client.”
The PLA said OPBAS and the government “must enter meaningful discussions with property lawyers” which “might include” the commissioning of “an independent cost/benefit analysis” of the impact of the AML regime on homebuying and the wider economy.
It might also include setting up an “independent commission to advise the government” on which AML laws and regulations could be repealed.
Leave a Comment