As a law firm operating in England and Wales, compliance with the Solicitors Regulation Authority (SRA) guidance on the UK sanctions regime (updated in August 2024) will likely be an increasingly important part of your compliance framework. Under this guidance, the SRA stresses the importance of having key controls in place to mitigate sanctions risk. This includes sanctions risk assessments, appropriate training of staff, sanctions policies, controls and procedures, proper record keeping and effective sanctions screening capability.
This has come about due to the SRA having been given a new regulatory objective of “promoting the prevention and detection of economic crime” under the Economic Crime & Transparency Act 2023. The definition of ‘Economic Crime’ is far wider in scope than money laundering, and they are increasingly focussed on firm’s compliance with sanctions legislation.
The SRA notes that, at the most basic level, a firm should check the identities of clients and counterparties against the UK consolidated sanctions list.
But how can you manage this responsibility without overwhelming your team or spending too many resources?
This can be done either:
- with digital screening tools that check against the list or;
- by using HM Government’s free screening platform.
Understanding Counterparty Sanctions Risks
The SRA guidance stresses that the sanctions regime applies not only to clients but to counterparties also:
“Counter-parties and third parties present a risk because if they are designated persons, or are owned or controlled by designated persons, the funds they introduce into a transaction may need to be frozen and made unavailable to, or for the benefit of, the designated person”.
Firms may breach the regime by transferring assets to third parties or counterparties, for example, in the form of damages, compensation, or payments under a trust or a will”.
It goes on to state that, “If you are acting in a matter where you become aware that the counterparty or a third party has been sanctioned, similar concerns apply. You cannot simply assume that this is a problem for the other party and their lawyer, or that they have necessary licences in place”.
The SRA therefore recommends that your controls include screening counterparties against sanctions lists.
Who are counterparties?
In the context of sanctions and regulatory compliance, counterparties are any external parties that law firms engage with through their clients’ matters, such as suppliers in a commercial agreement, entities or individuals receiving benefits through a client transaction, intermediaries or agents who are part of a deal etc.
Potential challenges for legal firms
A key issue lies in the fact that a counterparty is not a client of the law firm. This means that you may not have the facility or license to do full AML-related due diligence on these individuals or entities. In fact, the SRA have confirmed that they do not envisage checks on counterparties to be as extensive as clients.
How can you manage the responsibility of managing counterparty risk without overwhelming your team or significantly increasing resource, time and effort
Wouldn’t it be good if you perform one level of checking for clients, and another for counterparties?
Why flexibility in screening matters
The SRA guidance notes that screening tools can be helpful in mitigating risk. But not every client or transaction is the same, and not every client or counterparty presents the same levels and types of risk.
While screening against sanctions is essential, other checks, such as politically exposed persons (PEPs) and adverse media, may not always be necessary for every situation. That’s why our platform offers three distinct monitoring options:
- PEPs, Sanctions, and Adverse Media
- PEPs and Sanctions
- Sanctions Only
This flexibility allows your firm to tailor its compliance approach dependent on risks or to specific cases.
Given the SRA’s position on sanctions risk management, having the ability to focus exclusively on sanctions checks for counterparties or third-parties may be extremely useful.
How Amiqus can help
At Amiqus, we offer customisable sanctions screening functionality designed to meet the unique needs of law firms in this area.
Amiqus covers all of the SRA’s recommended questions you should be asking suppliers – including frequency of update/refresh, global list coverage and fuzzy matching capability.
This can be coupled with supervisory-approved risk assessment capabilities, leading edge biometric Identity Verification software, and Source of Funds/Wealth investigation tools to provide a comprehensive suite of functionality to help your firm manage and mitigate AML and economic crime risk.
Demonstrate compliance with confidence
The Amiqus platform not only helps you screen more efficiently and effectively but also documents and demonstrates all your compliance activities. With built-in audit trail functionality, your firm can easily provide evidence of your due diligence, use of screening and risk-based decision-making.
This is particularly important when responding to regulatory inquiries or conducting internal audits, as it shows you’ve taken the right steps to manage risks.
With Amiqus, you can customise your screening to meet your firm’s needs, prioritise and implement checks on a risk-based approach or on a use-case basis, and help your fee earners and partners refocus on serving your clients.
Compliance shouldn’t be a burden; it should be a strategic advantage. Let us help you stay ahead.
Schedule a call today to learn how our platform can help your firm stay compliant and efficient.
