More than 1,000 firms have been sent advice from the Solicitors Regulation Authority about complying with the UK’s financial sanctions regime.

Announcing the figure, the regulator stressed that the correspondence was intended to be ‘guidance and support’ on how to identify whether clients are in high-risk categories. But the SRA said that data and responses gathered from firms had identified a ‘large number’ that indicated they had poor controls in place.

Sanctions risk assessments are not compulsory but the SRA recommends them for firms at higher risk of dealing with a sanctioned client. The sanctions regime – which expanded hugely with the Russian invasion of Ukraine in 2022 – prevents professionals from dealing with certain clients unless licensed to do so by the Office for Financial Sanctions Implementation (OFSI). A breach of UK sanctions, even if unintentional, is a criminal offence punishable by a fine and/or imprisonment.

Law firms are being sent advice on compliance, guidance on completing risk assessments and a template for them to use.

‘The sanctions regime applies to all firms that provide legal services, not just those that are captured by the anti-money laundering regulations,’ said Juliet Oliver, SRA deputy chief executive. ‘Firms we have written to responded to our survey last year by saying they did not have or were not aware of a written-down firm-wide risk assessment, or the process for identifying an ultimate beneficial owner. The support we’ve provided should help address these issues and help firms remain compliant.’

The SRA has an ongoing programme of on-site inspections to test compliance with the regime, and will start proactive desk-based reviews to test a sample of these firms’ controls later this year.

Firms at heightened risk are likely to be those involved with multi-jurisdictional transactions, those arranging complex corporate structures where someone is the ultimate beneficial owner, those dealing with high net-worth individuals and those providing trusts and company services. Legal work in shipping and aviation is also considered higher risk.

The SRA warns that those seeking to circumvent sanctions may target solicitors who are inexperienced in dealing with them. Layers of corporate ownership and intermediaries may also be used to obscure links to a designated person.

 

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