Following an investigation by the Solicitors Regulation Authority, a solicitor of 47 years was discovered to have failed to perform due diligence on the third-party account details provided by his client.

As a result, payments were made to a Chinese bank account that is now known not to have any connection with the real owner of the properties. The SRA had been alerted by the solicitor’s own firm. The firm, based in Newcastle, reported concerns to the regulator that it had been involved in a vendor fraud.

The following investigation identified multiple instances where the solicitor is believed to have caused the firm to fall short of Anti-money laundering regulation requirements. A review of nine cases revealed that none had been carried out with an appropriate client and matter risk assessment.

The solicitor in question reportedly failed to adhere to the firm’s policies, controls and procedures in regards to the sales of two irrespective properties, and further omitted to carry out due diligence on client files.

The solicitor confessed to being in breach of the code of conduct, stating solicitors must keep up to date with laws and regulations. On account of the fact that the sale payments were made to non-clients, he also confessed to a technical breach of the rule that prevents client accounts from being used as a banking facility.

In conclusion of the investigation, the SRA announced via their report that the solicitor cooperated throughout. Regardless, the regulator noted that these were significant breaches that had the potential to facilitate money laundering.

Taking account of the solicitor’s experience and that the matter was thought to form a pattern of behaviour, the fine was established halfway between 16% and 40% of his gross annual income.

Accounting for his cooperation and the subsequent efforts made to assist the SRA throughout, he was fined a total of £15,075 and ordered to pay an additional £600 in costs.

Regulation & Compliance: Breaches Recap

• Client & Matter Risk Assessments (CMRA)

Throughout the investigation, the Forensic Investigation Officer (FIO) reviewed nine of the solicitor’s matters that were in scope of the MLRs 2017 and discovered that he had failed to conduct a CMRA, as required by Regulation 28(12)(a)(ii) and Regulation 28(13) of the MLRs 2017.

• Enhanced customer due diligence (EDD)

The FIO also determined that between January 2023 and March 2024, in the matters relating to the sales of two properties, the solicitor failed to carry out EDD as required by Regulation 33 of the MLRs 2017.

• Disregard of the Firm’s Policies, Controls & Procedures (PCPs)

The solicitor admitted to failing to sufficiently understand his obligations under the MLRs 2017. He also failed to abide by his firm’s PCPs in a way that would ensure compliance with the MLRs 2017.

• Client Relationship Monitoring

The solicitor also failed to perform customer due diligence on the third-party account details provided to him, pursuant to his ongoing obligations to monitor the client relationship under Regulation 28(11) of the MLRs 2017. Payments were made to a Chinese bank account not belonging to or having any connection with the true owner of the properties.

Because the name on the bank account was not that of the client of the firm, the solicitor accepted that the payments did not relate to any services provided by the firm to the owner of the account. This resulted in a technical breach of the client account banking facility rule.

Source: here.

Risk & Compliance Support

All firms must demonstrate and uphold high standards in their AML systems and processes, as well as in their management and supervision. This also involves outlining how the firm operates, including the conduct of staff through set policies, controls and procedures.

At the Regulation & Compliance Office, we can offer a number of outsourced support solutions, including:

• Regulation & Compliance Service – Our Risk Management Assessment Service has been specifically designed to review and update a firm’s approach to risk and compliance management.
• MLR 2017 Regulation 21 Independent Audit – A review of the firm’s approach to regulation and compliance, including AML procedures, with the audit meeting the requirements of Regulation 21 of AML 2017. The output provides the firm with a written gap analysis and solutions to remedy any issues and ensure compliance.
• AML Training Courses – Our Typical AML Training Includes:
  • AML Training for ALL staff to meet the firm’s obligation to provide annual training.
  • One-to-one training for the MLRO and MLCO on their obligations and requirements.

To ask any questions about the Regulation and Compliance Office and how we can support your Law Firm, please call us on 0203 985 8550, complete the online enquiry form below, or email us at info@regulationandcomplianceoffice.co.uk