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Paperwork is not a shield: Why your SRA aml audit demands more than just a dusty manual

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The Solicitors Regulation Authority continues its aggressive crackdown on financial crime with a recent fine issued against Whiteheads Solicitors (Staffordshire) Ltd. This decision serves as a stark reminder that the regulator is looking far beyond simple paperwork during an SRA aml audit.

The firm was fined 2,584 GBP plus 600 GBP in costs following an investigation into its compliance with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. While the firm had a firm-wide risk assessment and general policies in place, the SRA identified critical failures at the matter level.

Key compliance failures included:

Failure to conduct adequate client and matter risk assessments. The SRA found a consistent pattern where the firm failed to sufficiently assess client matter risk levels as required by Regulation 28.

Inadequate scrutiny of source of funds. In one specific property transaction, the firm failed to properly investigate the origin of funds provided by a third party, despite having access to savings account statements that should have triggered further inquiry.

Lack of AML documentation. The regulator emphasized that policies alone are insufficient if they are not applied to individual files.

This case highlights a common pitfall during an SRA aml audit: the gap between firm-wide policy and file-level execution. Even though the firm cooperated and the impact was deemed low because they had foundational AML policy documents, the SRA still applied a penalty due to the nature of the misconduct.

For law firms, the message is clear. Having an AML policy on the shelf is not enough. You must demonstrate that every client and matter undergoes rigorous scrutiny and that your CMRAs are active, documented, and accurate. The SRA is increasingly using desk-based reviews and proactive audits to find these gaps, and as this decision shows, they will not hesitate to issue financial sanctions for systemic oversight.


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