In an unprecedented move, the Solicitors Regulation Authority (SRA) has reached out to over 1,000 firms, providing essential guidance on navigating the intricate landscape of the UK’s financial sanctions regime. This outreach serves as a beacon for law students and practicing legal professionals, emphasizing the importance of understanding and complying with the evolving sanctions landscape.
In an effort to fortify the legal industry against potential pitfalls related to financial sanctions, the SRA has extended guidance to a wide spectrum of firms, aiming to assist them in identifying clients falling within high-risk categories. The correspondence, framed as ‘guidance and support,’ sheds light on the necessity of sanctions risk assessments, especially for firms at elevated risk of dealing with sanctioned clients.
While sanctions risk assessments are not mandatory, the SRA strongly recommends them, particularly for firms engaging with clients in high-risk categories. The exponential growth of the sanctions regime, notably triggered by the Russian invasion of Ukraine in 2022, underscores the gravity of this issue. Legal professionals must be aware that unauthorized dealings with certain clients can lead to criminal charges, including fines and imprisonment.
Law firms receiving this advisory are being equipped with comprehensive guidance on compliance, assistance in completing risk assessments, and templates to streamline the process. Juliet Oliver, Deputy Chief Executive of the SRA, underscores that the sanctions regime applies universally to all legal service providers, transcending anti-money laundering regulations.
“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,” explains Oliver.
The SRA’s proactive approach extends beyond advisory letters, encompassing an ongoing program of on-site inspections to assess compliance with the sanctions regime. Furthermore, the regulator plans to initiate desk-based reviews to scrutinize a sample of firms’ controls later in the year.
Firms at heightened risk include those involved in multi-jurisdictional transactions, managing complex corporate structures, handling high net-worth individuals, and providing trusts and company services. Legal professionals engaged in shipping and aviation are also flagged as having increased risk exposure.
The SRA cautions against potential attempts to circumvent sanctions, emphasizing that solicitors lacking experience in dealing with such matters may be targeted. Complex corporate ownership structures and intermediaries may be exploited to obscure connections to designated persons.
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