SRA Crackdown Sees Huggins Lewis Foskett Pay £78,000 Over AML Failures

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An east London law firm, Huggins Lewis Foskett, has become the latest example of how serious the UK’s regulatory approach has become around anti-money laundering (AML) compliance failures within the legal sector. Following a multi-year investigation by the Solicitors Regulation Authority (SRA), the firm was ordered to pay £78,000 after a series of documented breaches involving the Money Laundering Regulations (MLRs). This penalty, which was finalized after a Solicitors Disciplinary Tribunal hearing, not only serves as a cautionary tale for other professional service providers but also signals a turning point in how the SRA is enforcing AML obligations for law firms across the country.

The importance of robust AML procedures within UK legal services cannot be overstated. Law firms play a central role in property transactions, the movement of large sums, and structuring deals, all of which create opportunities for abuse by organized crime. UK regulators and legislators have prioritized reducing these vulnerabilities by establishing increasingly stringent requirements, with significant financial and reputational consequences for non-compliance.

Understanding Money Laundering Risks in the Legal Sector

Money laundering is an ongoing threat to the UK’s economic stability and the integrity of its legal profession. Solicitors, particularly those involved in conveyancing and property-related work, have been repeatedly identified as attractive targets for criminals seeking to introduce illicit funds into the financial system. According to the SRA and the National Crime Agency, the legal sector remains exposed to attempts to conceal the origins of criminal assets, particularly through property transactions and client accounts.

The UK’s current regulatory framework is centered on the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, commonly referred to as the Money Laundering Regulations (MLRs). These require law firms to conduct risk assessments, maintain robust policies and controls, implement independent audits where relevant, and keep detailed records of client due diligence and ongoing monitoring.

In the Huggins Lewis Foskett case, failures were identified across several critical areas:

Lack of documented firm-wide risk assessments between 2017 and 2022, despite handling work largely in-scope of the MLRs.
Absence of appropriate AML policies, controls, and procedures for extended periods.
Delay in establishing an independent audit function until 2024.
Shortcomings in how client and matter-level risk assessments were documented and evidenced for regulatory review.

Such deficiencies not only breach the letter of UK AML law but also leave firms vulnerable to exploitation by criminal networks, even if no suspicious activity is detected during the period of non-compliance.

Regulatory Framework and SRA Enforcement Trends

The SRA has significantly stepped up its enforcement activity related to AML over the past two years, responding to pressure from both the UK government and the Financial Action Task Force (FATF) to demonstrate more robust supervision of the legal sector. The agency is empowered to issue fines for AML breaches, though there is a statutory limit to the amount it can impose directly (currently £25,000 for most traditional law firms). Where fines exceed this cap, cases are referred to the Solicitors Disciplinary Tribunal (SDT), as seen with Huggins Lewis Foskett.

Recent amendments to the Economic Crime and Corporate Transparency Act 2023 have further expanded regulatory tools available to both the SRA and other competent authorities. The Act has introduced new powers for oversight, information gathering, and penalty escalation for repeated or severe breaches. There is also an expectation that law firms will not only implement compliance measures but demonstrate a proactive culture of financial crime prevention, with leadership directly accountable for failures.

Cases such as Tolhurst Fisher (£120,000 fine), T G Baynes (£64,000), and high-profile penalties for firms like Simpson Thacher & Bartlett (£300,000) underscore the increasing willingness of UK regulators to levy substantial financial sanctions, particularly where systemic deficiencies persist over many years.

Lessons for Law Firms: Building Resilient AML Programs

The outcome for Huggins Lewis Foskett underlines the risks facing any law firm operating without effective, up-to-date AML controls. The regulatory expectations extend far beyond basic client due diligence:

Firm-Wide Risk Assessment: Law firms must carry out and regularly update documented risk assessments that address the specific nature, size, and activities of the practice. This process must consider geographic exposure, client types, service offerings, and delivery channels.
Comprehensive Policies and Controls: AML policies must cover customer due diligence, ongoing monitoring, politically exposed persons (PEPs), sanctions, record keeping, and staff training. Procedures must be clearly documented and accessible to all relevant employees.
Independent Audit Function: Where required by the size and risk profile of a firm, an independent audit should periodically review the effectiveness of AML policies, controls, and procedures. This audit must be adequately resourced and free from conflicts of interest.
Ongoing Monitoring and Record Keeping: Firms must monitor transactions and client behavior for suspicious activity on an ongoing basis and ensure all records can be provided to the SRA upon request.
Management Responsibility: Senior managers and compliance officers are personally responsible for overseeing AML compliance. The SRA expects direct board-level or partnership engagement in the review and improvement of financial crime controls.

The SRA’s own risk assessments have identified particular weaknesses among small and medium-sized firms, especially those where AML roles are not clearly defined or where compliance functions are under-resourced. Firms should expect both thematic reviews and targeted inspections to continue, with little tolerance for prolonged or repeated breaches.

Sector Impacts and the Road Ahead

Law firms found to be non-compliant with AML regulations risk far more than financial penalties. Enforcement actions routinely result in reputational damage, loss of client trust, increased insurance costs, and, in some cases, restrictions on business activities or loss of authorization.

There is also a broader societal context to these enforcement actions. Legal professionals are uniquely placed to act as gatekeepers in the fight against organized crime. Effective AML controls are essential not only for meeting regulatory expectations but also for upholding the reputation of the legal sector and safeguarding the wider public interest.

The UK government continues to emphasize AML effectiveness in its National Risk Assessment and Economic Crime Plan. This includes further tightening of AML standards for all professional service providers, not just financial institutions, and increased expectations for self-reporting of breaches or weaknesses.

The future will likely see more automation and technology-driven solutions in AML monitoring, such as advanced analytics for transaction monitoring and client onboarding. However, no system can substitute for a well-trained workforce and a culture of compliance embedded at every level of the organization.

Conclusion: The Essential Role of Compliance in Legal Practice

The £78,000 sanction for Huggins Lewis Foskett offers a clear reminder to every UK law firm of the consequences of inadequate AML frameworks. The evolving regulatory landscape, increasing enforcement, and the critical public interest dimension of AML mean that compliance is not merely a box-ticking exercise but a core element of professional and ethical practice. With continued SRA scrutiny and the expansion of legislative tools under the Economic Crime and Corporate Transparency Act, firms must remain vigilant, ensure robust documentation, and foster a culture where financial crime prevention is integral to their daily operations.

Source: The Law Society Gazette, by John Hyde

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