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AML Firm-wide Risk Assessment: No1 Document

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The foundational document when is comes to AML compliance is the AML firm-wide risk assessment. It is often described as the keystone of money laundering compliance in a law firms. Once a well drafted AML firm-wide risk assessment (FWRA) is in place the remainder your AML policies and procedures, training and due diligence will flow from it.

The Focus of the FWRA

The Money Laundering Regulations 2017 sets out five key areas for the FWRA to focus on:

  • Clients
  • Geographic areas
  • Products and services
  • Transactions
  • Delivery channels

However, there are many other elements that need to be considered. Regulation 18A of the money laundering regulations also requires firms to identify the risk of proliferation financing. This can either be considered separately or within the AML firm-wide risk assessment. Further guidance on how to carry out a proliferation financing risk assessment can be found in the Legal Sector Affinity Group (LSAG) guidance.

Common Pitfalls

I have been told by some of the AML assessors in Lexsure's Independent AML audit team that that most firms now have a firm wide risk assessment in place. That said, they say that to find a significant proportion of firm wide risk assessments which would fall short of the expectations of the SRA.

The requirement to have a firm wide risk assessment has now been in force since 2017. The purpose of a firm wide risk assessment is help identify the risks a firm is or could be exposed to, and the measures which should then be put in place to help mitigate the firms' exposure to financial crime. It is a crucial step in being able to prevent money laundering.

SRA Enforcement

The SRA have made it very clear that they will take robust action against any firms who do not have an acceptable AML firm wide risk assessment in place. Law firms should read the SRA decisions or firm wide risk assessment case studies to learn from the mistakes of others.

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