The Legal Services Regulatory Authority (LSRA), as Supervisory Authority for the purposes of the Proceeds of Crimes Act 2015 (POCA), has issued a financial penalty of £3,750 to a Gibraltar law firm.  

A statement from Legal Services Regulatory Authority follows below:

The enforcement action was taken pursuant to Regulation 18 of the Supervisory Bodies  (Powers) Regulations 2017 and relates to the identification by the LSRA of breaches and  deficiencies in how the law firm complied with its anti-money laundering, combatting the  financing of terrorism and counter proliferation financing (AML/CFT/CTF) POCA obligations. In  particular, these related to; 

Determination of client risk: The firm’s policies, controls and procedures in respect of  relevant financial business (RFB) transactions assumed that its clients were low risk.  The firm had not therefore adequately assessed each client and transaction on a case by-case basis. This in turn impacted on the customer due diligence measures applied;  

Ongoing monitoring: While the firm had introduced ongoing monitoring procedures in  respect of targeted financial sanctions, these did not encompass the wider POCA  obligations to carry out ongoing monitoring of relevant financial business clients and  transactions;  

Employee screening: The firm did not have adequate procedures for screening new or  current members of staff; and  

Training: Insufficient AML/CFT/CPF training had been provided to the firm’s legal  professionals and staff.  

Sectoral learning points  

The firm’s failings relate to misunderstandings of its AML/CFT/CPF obligations under POCA and  included straightforward technical breaches in the firm’s policies, controls and procedures 

which did not adequately cover all POCA obligations. The key learning point for other legal  practices conducting RFB is therefore that they should ensure that their policies, controls and  procedures to allow it, and the legal professionals working in the practice, to meet all those  obligations effectively.  

It is also worth noting in relation to this matter, that the firm was unable to demonstrate the  processes it carried out to meet its POCA obligations. It is therefore recommended that legal  practices should have systems in place to record and demonstrate how POCA obligations are  met, e.g. employee screening and training.  

Proportionality of enforcement action  

Some of the breaches and deficiencies identified by the LSRA are considered fundamental and  significant and would ordinarily result in more significant enforcement action being taken by the  LSRA. The very low materiality of the RFB carried out by the firm, whose practice encompasses  only a very small amount of RFB transactions, however, has meant that the level of  enforcement action has been reduced significantly, taking into account all mitigating and  aggravating factors.  

Although this was not a key factor in reducing the enforcement action taken, the LSRA also  noted that the law firm was cooperative during its enforcement process, and accepted and  implemented a remediation action plan issued by the LSRA to ensure compliance going  forward.  

Taking into account all the factors in the Supervisory Bodies (Powers, etc.) Regulations 2017  relating to publication, the LSRA took the view that it should make these sanctions and their  background public, but that it was not proportionate to disclose the identity of the law firm when  doing so.