Welcome to the Regulation & Compliance Office’s fortnightly roundup, where we look at all the latest stories to keep you ahead and informed in the world of law and compliance.
The RACO roundup is just another way in which we keep the solicitors and other law professionals we work with in the know, so we can ascertain you are never missing the vital developments occurring in your profession.
Below you will find the most recent headlines selected by our compliance experts, followed by a Security Section, where we will also give you an overview of the latest scams currently impacting solicitors and their clients.
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AML Failures: Firm Fined Over £27,000
Seven years without having the appropriate anti-money laundering measures in place results in Birmingham firm being fined over £27,000.
The Solicitors Regulation Authority discovered over the course of a recent investigation that the Birmingham-based firm did not have the necessary risk assessment and policies, controls and procedures documents in place. This was found to be the case during a period between 2017 to as late as last September.
The SRA has reported carrying out an initial inspection at the firm to assess compliance, whereupon it discovered several compliance failings. The SRA further reported that in two of the eight files reviewed, the firm had not conducted ongoing monitoring. This further included scrutiny of transactions and customers’ source of funds checks.
In three of the eight reviewed cases, the firm also failed to carry out the required due diligence, and admitted to breaching SRA principles as well as failing to comply with AML legislation.
The regulator stated the firm demonstrated a “disregard for statutory and regulatory obligations,” – some of which had the potential to cause harm by allowing suspicious transactions. Had adequate risk assessments and controls been in place, this could have been avoided.
However, it was recognised in the subsequent SRA report that the firm had implemented compliant processes “promptly” in light of the feedback it was given, and cooperated with the investigation thoroughly. The SRA further added: “Although there was no direct loss to clients, the firm’s failure to ensure it had proper documentation in place, for at least seven years since the MLRs 2017 came into force, put it at greater risk of being used to launder money, particularly when acting in conveyancing transactions.”
The penalty was assessed as being 2.4% of annual domestic turnover, which resulted in a basic fine of almost £40,000. However, the amount was reduced to £27,813 based on the amount of mitigation the firm implemented.
Due to the firm’s status as an alternative business structure, the SRA was able to levy a fine of more than £25,000. Alongside this, a sum of £600 additional costs was agreed upon.
“The nature of conveyancing is considered high risk, owing to the risk of abuse of the system by criminals. This left the firm at risk of being used to launder money and in turn increased the risk of harm,” the SRA concluded.
Read the full article here.
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“Momentary Lapse of Judgment” – Solicitor Who Backdated Letter Gets Suspension Suspended
Solicitors Disciplinary Tribunal suspends suspension on a solicitor who backdated letter to “relieve pressure of further email enquiries”.
The solicitor, who at the time worked for a law firm based in Liverpool, claimed to have suffered a “momentary lapse of judgment.” The lapse subsequently led to the solicitor creating and backdating a letter in response to the mounting pressure they felt due to another colleague.
The SDT has now ruled the solicitor in question may continue in practice. After being admitted in 2004, the solicitor was suspended from practice for two years. Originally an associate of the firm, the solicitor was the fee earner for a matter concerning claims against a landlord.
Following inquiries from a colleague, the solicitor reportedly created and backdated a letter to their client’s landlord to make it appear as if work had been completed on the client file. It was later discovered that no such work had been done.
When quizzed by her colleagues on where the letter was, the solicitor “admitted that she had been mistaken about the date that the letter had been sent” and was dismissed for gross misconduct in March last year.
In the judgement following the hearing on August 2024 (see here), the SDT claimed that the solicitor’s conduct had been motivated by “a desire to avoid further criticism from a colleague repeatedly demanding to be furnished with an immediate update as to what work had been done”.
The judgement also found the solicitor ‘had manually changed the date on the document to make it appear as if she had been working on the document on that date in circumstances where she had not”.
In consideration of the solicitor’s mitigation, the tribunal added: “At the relevant time, the respondent had been struggling with the volume of work within the firm, and the day before the misconduct, had had a very challenging work schedule which had resulted in her working till late in the evening”.
The tribunal also remarked on the solicitor’s “unblemished and exemplary professional and regulatory history,” whilst noting she had been dishonest and directly responsible for the misconduct.
“The act of dishonesty was an isolated incident as it had not been elaborately pre-planned (…) it was nonetheless capable of affecting the reputation of the profession.”
The solicitor’s 12-month suspension from practice, commencing on 29 August 2024, was suspended for a period of two years. In conclusion, she was also ordered to pay £10,000 costs.
The perceived benefit of the backdated letter was “very marginal” and “would have involved no more than the respondent being relieved of the pressure of further email enquiries.”
The SDT described the solicitor’s misconduct as “a response to the pressure experienced from her colleague’s enquiries” and that it was “in effect, a momentary lapse of judgment in an otherwise unblemished legal career.”
Read full article here
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Warning to Law Firms: Beware of Sham Litigation
The Solicitors Regulation Authority has published new guidance warning solicitors about the dangers of sham litigation.
According to the SRA, litigation firms are subject to significant risk due to being involved with high-value transactions. The ownership of assets can also be easily obscured in this area, which drastically increases the risk of money laundering.
Criminals are known to instruct lawyers to pursue a claim in the courts so the subsequent judgment or settlement agreement can serve as a front for the transfer of illicit funds.
The SRA cited the case of client Narinder Kaur, who reportedly used several firms in purported litigation with her sibling. In actuality, this litigation was being used to mask funds across several client accounts.
On their website, the SRA expounded that the legal sector’s vulnerability to sham litigation for money laundering meant that “firms must remain vigilant.”
“Litigation is not an activity within scope of the MLR 2017 which makes it attractive to money launderers. This exclusion means that the requirements of the MLR 2017, for example verification of identity, do not apply to purely litigation work.”
“Law firms, however, are still within scope of the Proceeds of Crime Act and should be capable of identifying red flags, as well as investigating the circumstances further to prevent their services from being misused in sham litigation.”
The SRA have concluded that firms will need to be cautious when considering the following:
- Clients who demonstrate thorough knowledge of law firm processes
- Unusual client information and identity verification
- Instructions from clients far from their home address
- Unsolicited contact, particularly from individuals who the claim is against
- Payment preferences and settlement urgency
- Unreliable appointment attendance.
The regulator expects firms to keep detailed records to ascertain their clients are who they claim to be. Anyone with suspicions about money laundering should submit a report to the National Crime Agency.
In a recent article, the Law Gazette article commented that, “Firms can strengthen their defences through early involvement of compliance officers, regular refreshment of accounts rules and making sure policies and procedures are up to date. E-verification systems should not be solely relied upon to check up on clients.”
Though most of the firms involved had strong suspicions around Kaur from the outset, others had gotten to the point of receiving payments. Kaur (also known as Nina Taria) sued her brother and then approached firms for a supposed judgment debt claim against him.
A man (someone posing as her brother) then contacted the affected firms and offered partial payment from a credit card that has since been discovered to have been stolen. Kaur has been convicted on several counts of fraud and jailed for 10 years.
AML Systems & Processes Support
All firms must uphold high standards in their AML systems and processes, as well as in their management and supervision. 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.
Contact Us
For more information on the Regulation & Compliance Office and to discuss how we may be able to assist in accelerating your risk management or compliance and regulation, you can call us on 0203 985 8550 or email us at info@regulationandcomplianceoffice.co.uk
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SCaM ALERtS
A website misusing the name of ‘Vanguard Law Ltd’
The SRA has been informed that a website at ‘www.vanguard-law.net’ is misusing the name of a genuine firm of solicitors. The website also misuses the genuine firm’s address.
The SRA has published on its website that members of the public have been contacted via social media in relation to “financial mis-selling claims and recovery of monies lost to fraud”.
Please note that any business or transactions through the website ‘www.vanguard-law.net’ is not undertaken by a firm or individual authorised and regulated by the SRA.
Please note that the SRA authorises and regulates a genuine firm of solicitors called Vanguard Law Ltd which trades as Vanguard Law Solicitors.
The genuine firm’s address is 8-10 Hargreaves Street, Burnley, BB11 1ED.
Its genuine website is ‘www.vanguardlawsolicitors.co.uk’.
The genuine firm does not offer such services as those claimed on the bogus website referred to above. Vanguard Law Ltd has confirmed they have no connection to the website referred to in the above alert.
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Fake Law Firm: Expert Legal Studio
The SRA has published on their website that a website at ‘expert-legalstudio.com’ is falsely claiming to be a law firm.
A document has also been sent claiming to be from ‘Expert Legal Studio’ in relation to supposed cryptocurrency transactions. The document claims to have been signed by ‘Marc T. David’.
The website gives the telephone number ‘+441226822003’.
It also gives the email address ‘info@expertlegalstudio.com’, and the address ’86-90 Paul Street, London UK’.
Please note that the SRA does not authorise or regulate a genuine firm of solicitors called ‘Expert Legal Studio’.
Nor does it authorise or regulate a genuine individual called ‘Marc T. David’.
Any business or transaction through the telephone number ‘+441226822003’, the email address ‘info@expertlegalstudio.com’ and the address ’86-90 Paul Street, London UK’ is not undertaken by a firm or individual authorised and regulated by the SRA.
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Emails misusing the name of Travers Smith LLP
Emails have been sent misusing the name of a genuine firm of solicitors in relation to a supposed copyright infringement matter relating to the use of music works without authorisation.
The email seen by the SRA claims that the recipient has used music owned by Travers Smith without authorisation. It advises the recipient to take certain specified actions within 7 days of the notice. The SRA has been informed that the email was sent from the email address ‘esmiolrobertsbeif@gmail.com’.
A PDF document titled ‘Copyright Infringement Evidence – Images and Videos’ was also attached to the email. A concern is that the PDF document may contain malware.
Please note that any business or transaction through the email address ‘esmiolrobertsbeif@gmail.com’ is not undertaken by a firm or individual authorised and regulated by the SRA.
The SRA authorises and regulates a firm of solicitors called Travers Smith LLP. The firm uses the email domain @traverssmith.com.
Travers Smith LLP has confirmed that it has no connection to the emails referred to in the above alert.
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BEEN CONTACTED?
Here’s What to Do…
When a firm’s or individual’s identity has been copied or cloned, due diligence is necessary. If you receive correspondence you believe to be suspicious, you should conduct your own due diligence by checking the authenticity of the correspondence by contacting the law firm directly by reliable and established means.
You can also contact the SRA directly to find out if individuals or firms are regulated and authorised by the SRA and verify an individual’s or firm’s practising details. Other verification methods, such as checking public records (e.g. telephone directories and company records), maybe required in other circumstances.
Reach Out to RACO
We at RACO are always at hand to provide tailored guidance to help you make the most informed and beneficial decisions. We help you understand the recurrent regulatory shifts and work with you to provide solutions. With our team of professional specialists and our renowned legal expertise, we can work with your firm to always ensure you are never left unprepared in the wake of legal changes or cyber threats.
For more information on how we can help, call our consultants on 0203 985 8550 or email us at info@regulationandcomplianceoffice.co.uk
