Policy background Legal services - the removal of the statutory cap on the Law Society’s (as delegated to the SRA) power to issue financial penalties, for disciplinary matters relating to breaches of the economic crime regime
The current crisis in Ukraine has shone a light on the role legal services regulators play in preventing and detecting economic crime. The legal services sector was assessed in HMT’s National Risk Assessment of money laundering and terrorist financing (2020) as being at high risk of abuse for money laundering purposes. The crisis has highlighted the sector’s exposure to risks spanning different areas of economic crime, such as fraud or breaches of the sanctions regime.
	Legal professionals are already bound by high standards with regards to their anti-money laundering obligations. In light of the Ukraine crisis, legal services regulators have updated guidance to support the sector to aid compliance of economic crime, particularly the sanctions regime. As regulators have a duty to enforce compliance of economic crime rules, it is important that they have the right tools, such as the ability to set and amend the levels of financial penalties in relation to economic crime.
	The Solicitors Regulation Authority (SRA) is the body that regulates all solicitors and traditional law firms. If a solicitor or law firm is in breach of economic crime rules, the SRA, as delegated from the Law Society, can direct a solicitor to pay a penalty not exceeding £25,000. Any cases warranting a higher penalty would require a referral to the Solicitors Disciplinary Tribunal (SDT), who have unlimited financial penalty limits. The maximum penalty amount that the Law Society can apply is set out in primary legislation and can only be amended by an Order made by the Lord Chancellor. In comparison, other frontline legal services regulators can set their fining levels in their discipline rules, subject to the Legal Services Board’s (LSB) approval, and they are not bound by the same statutory limitations as the SRA.
	This measure will align the SRA more closely with other regulators in relation to economic crime-related disciplinary matters by removing the statutory fining cap and allowing the SRA to set its own fining limits in guidance, with the LSB’s oversight.
	The appropriate checks on the SRA’s use of its power will stay in place. These include:
the requirement for the SRA to consult the SDT before making rules in relation to the exercise of this power;
the approval of the LSB in agreeing changes to regulatory arrangement;
the obligation for the SRA to follow their public law duties to take a proportionate approach;
the continued need to refer cases requiring more serious sanctions (such as strike off) to the SDT; and
the appeal route for all SRA fining decisions to the SDT.