East London Law Firm Fined £78,000 Amid SRA Crackdown on AML Failures

In a high-profile disciplinary action that highlights the increasingly rigorous approach of UK regulators toward anti-money laundering (AML) compliance, east London-based law firm Huggins Lewis Foskett has been fined £78,000 following a multi-year investigation by the Solicitors Regulation Authority (SRA). The penalty, which followed a hearing before the Solicitors Disciplinary Tribunal (SDT), underscores the intensifying scrutiny law firms face under the UK's robust AML framework and is a cautionary example for legal service providers across the country.

The investigation revealed multiple serious breaches of the Money Laundering Regulations (MLRs), including a complete lack of firm-wide risk assessments from 2017 to 2022, despite the firm undertaking work largely within the scope of the MLRs. Regulators also found the absence of appropriate AML policies, controls, and procedures during significant periods, as well as delays in establishing an independent audit function—only initiated in 2024. Moreover, the firm was criticized for deficiencies in how client and matter-level risk assessments were documented and evidenced for review.

Such oversights, though not necessarily tied to any proven suspicious activity, present a significant vulnerability to the risk of criminal exploitation. They also fall squarely afoul of the UK's stringent AML legal framework, leaving firms exposed not only to financial penalties but to reputational damage and regulatory sanctions.

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017—the backbone of the UK’s AML regime—requires law firms to conduct comprehensive risk assessments, implement tailored policies and procedures, maintain independent audits where needed, and ensure rigorous client due diligence and record-keeping. Huggins Lewis Foskett’s shortcomings represented violations across several of these essential pillars.

The SRA’s heightened enforcement efforts over the past two years are in response to growing pressure from the UK government and international bodies like the Financial Action Task Force (FATF), which have called for more stringent supervision of the legal profession. While the SRA’s direct fining powers are currently capped at £25,000 for most traditional law firms, larger penalties—like in the Huggins Lewis Foskett case—are referred to the SDT. The SRA has made it clear that it expects firms to go beyond basic compliance measures and demonstrate an active, leadership-led culture of financial crime prevention.

Recent cases, including the £120,000 fine issued to Tolhurst Fisher, the £64,000 penalty for T G Baynes, and the £300,000 sanction against Simpson Thacher & Bartlett, indicate that regulators are unafraid to impose substantial fines, particularly when systemic deficiencies persist over long periods.

The situation at Huggins Lewis Foskett is emblematic of the risks faced by any legal practice lacking modern, effective AML controls. Under the MLRs, all UK law firms must carry out and routinely update firm-wide risk assessments that are proportionate to their size, structure, and the nature of their work. These assessments must consider factors such as geographic exposure, client risk profiles, and delivery channels.

In addition, comprehensive AML policies must be clearly documented and accessible to all relevant employees. These policies should cover areas including customer due diligence, politically exposed persons (PEPs), sanctions compliance, ongoing monitoring, record-keeping, and regular staff training. For firms of a certain size and complexity, an independent audit function is essential. This audit must be adequately resourced, free from conflicts of interest, and designed to rigorously test the firm’s AML framework.

The importance of ongoing monitoring and meticulous record-keeping cannot be overstated. Law firms are expected to identify and respond to suspicious behavior and be prepared to provide detailed records to the SRA upon request. Critically, senior managers and compliance officers are personally accountable for the firm’s compliance posture. The SRA has made it clear that board-level or partnership-level engagement in financial crime prevention is no longer optional—it is essential.

The SRA’s own risk assessments continue to identify significant weaknesses among small and medium-sized firms, particularly where AML roles are ill-defined or under-resourced. As a result, law firms should anticipate both thematic reviews and targeted inspections in the coming years, with little tolerance for prolonged or repeated non-compliance.

Beyond the financial repercussions, firms that fail to meet their AML obligations risk serious damage to their reputation, potential loss of client trust, increased professional indemnity insurance costs, and, in extreme cases, restrictions on practice or deauthorization. This is not merely a compliance issue—it is a matter of protecting the integrity of the legal profession and the broader financial system.

Legal professionals occupy a critical position as gatekeepers in the UK’s fight against economic 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,” a sentiment echoed by both the SRA and the National Crime Agency. Property transactions, client accounts, and complex deal structures have long made the legal sector a prime target for criminal exploitation.

The UK government continues to emphasize the importance of robust AML procedures in its National Risk Assessment and Economic Crime Plan, with a particular focus on tightening standards for professional service providers beyond the financial sector. Firms are increasingly expected to self-report any breaches or control weaknesses and take immediate corrective action.

As the sector evolves, the integration of technology in AML efforts is expected to accelerate. From advanced analytics in transaction monitoring to automated onboarding systems, firms are exploring digital solutions to enhance their compliance capabilities. However, regulators maintain that technology cannot replace the role of a well-trained, vigilant workforce or the cultural commitment to compliance that must permeate every level of a legal practice.

The £78,000 sanction handed to Huggins Lewis Foskett is a stark reminder that AML compliance is not a matter of ticking boxes—it is a core element of ethical legal practice. With the Solicitors Regulation Authority sharpening its focus and the Economic Crime and Corporate Transparency Act 2023 providing new enforcement tools, firms must remain proactive and diligent. The cost of non-compliance, as this case illustrates, is steep—both financially and reputationally—and the expectation from regulators is clear: law firms must act decisively to ensure they are not the weak link in the fight against financial crime.

By fLEXI tEAM