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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£31,000 Fine for Over Six Years Worth of AML Breaches
The Solicitors Regulation Authority has issued one of the biggest anti-money laundering fines known in recent times against a firm that failed to comply with AML regulations for up to six years.
SRA investigators assessed and reviewed six files handled by the firm in question (based in Manchester). The result was the discovery that none of the selected files contained a compliant risk assessment, despite the firm’s staff handbook referring to a risk assessment and due diligence form. The firm’s handbook further set out a process for checking clients.
The regulator observed that the firm failed to document any risk assessment or provide a clear audit trail of the decision-making process, methods and reasoning. Based on the six selected files, the SRA reasoned that it was sufficient to maintain that staff were not following adequate processes from 2017 onwards.
The Manchester firm also failed to comply with the regulations for source of client funds checks. These files involved foreign nationals and showed red flags on an e-verification report. A noticeable lack of scrutiny about where clients resided or where the funds originated followed.
Back in 2023, the firm confirmed that its policies were up to date. It also confirmed an independent audit had been carried out, in conjunction with staff training and an all-in-scope review, leading to files being updated in keeping with the risk assessment and source of funds checks.
The SRA acknowledged that the firm took steps to correct failings and that it is now compliant with regulations. Due to its full cooperation and admittance of breaches, a fine of between 1.6% and 3.2% was deemed fitting.
Regardless of actions the firm took to remedy the failures, the SRA commented that the firm had still shown a “disregard towards statutory and regulatory obligations” that had the potential to cause harm, especially so considering that a quarter of the firm’s work is in scope of the MLRs and mostly through conveyancing.
Despite the mitigating factors being taken into account, the regulator still issued a fine of £31,217. The amount was permitted because the firm is an alternative business structure and thus is not subject to the £25,000 limit that applies to standard firms.
“It was incumbent on the firm to meet the requirements set out in the MLRs 2017,” the SRA further stated. “The firm failed to do so. The public would expect a firm of solicitors to comply with its legal and regulatory obligations, to protect against these risks as a bare minimum.”
Source: here.
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£25,000 Fine for Paddington-Based Firm Over Regulation Breaches
Paddington-based firm has been fined more than £25,000 for failing to comply with anti-money laundering regulations. One of the firm’s salaried partners was also fined an additional £3,500.
The firm admitted to the breaches and was also ordered to pay £18,000 in costs. The Solicitors Disciplinary Tribunal discovered the firm had “failed to have proper procedures in place in order to ensure its compliance with its regulatory obligations.”
The tribunal heard that between 2018 and 2020, the firm allowed money to be received and paid from the firm’s client account in circumstances not related to an underlying legal transaction being undertaken by the firm. Neither were the funds in relation to the delivery of standard regulated services.
Between 2017 and 2021, the firm also failed to:
- Apply enhanced customer due diligence and/or enhanced ongoing monitoring,
- Conduct ongoing monitoring of its business relationships with such entities, and
- Conduct a risk assessment of the client and/or matter.
The SDT stated: ‘[The firm] had direct control of those failings, which had continued over a significant period of time. It had allowed its client account to be used as a banking facility in circumstances where it had failed to ensure that proper checks were in place to militate against the risks of money laundering.”
In (non-agreed) mitigation, the firm admitted, “failure to appreciate the nature and extent of the 2017 MLRs’ more extensive requirements is at the heart of this case and the admissions made.” Taking into account the firm’s turnover, a fine of £25,258 was considered appropriate.
A salaried partner with primary responsibility at the firm at the time of the failings was alleged (between 2017 and 2020) to have “materially contributed” to AML failures.
The partner admitted the allegation on the basis that she “failed to scrutinise the source of funds for transactions and “failed to properly assess the risk posed by each transaction.”
However, the partner did not accept that she had materially contributed to the firm’s failure to apply enhanced customer due diligence measures. That allegation was, therefore, withdrawn.
The partner assessed that the breach had occurred “not as a result of any intention or recklessness…but a failure to appreciate her duties and obligations under the legislation.”
The partner also insisted that (as accepted by the firm) she had been “operating in an AML environment which was falling short of the regulations,” despite the tribunal stressing that the SRA hadn’t endorsed this mitigation.
In conclusion, the SDT stated that “[the partner] should have ensured that the necessary [customer due diligence] information was obtained. As an experienced solicitor and partner in the firm, [the partner] should have been aware of the relevant Rules and Principles.”
As a result, Miller was ordered to pay a fine of £3,500 and an additional £6,500 in costs.
Read the Solicitors Disciplinary Tribunal’s full report here.
An equity partner has also been fined £20,000 and ordered to pay £10,000 costs for breaches of anti-money laundering regulations (read more 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
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Partners Insight – February, 2025
RACO’s first-ever Partners Insight Newsletter has landed – our exclusive bi-monthly publication wherein we showcase our current partners, their services and other essential insights. See the full newsletter here.
Our first edition showcases:
- FireTap Marketing – Legal Marketing specialists assisting your firm in brand building and generating more leads. Showcase your firm, and gain more clients with effective marketing strategies. Find out more
- PracticeEvolve – PracticeEvolve is a leading provider of cloud-based business operations software designed specifically for law firms. Committed to enhancing efficiency, productivity, and progressiveness, we prioritise customer satisfaction through exceptional service and continuous product innovation. See more here.
- LegalKeepers – Expert legal bookkeeping and cashiering services, helping law firms streamline their finances with confidence. Read more here.
- Aquarius Reporting – Advanced data consolidation and visualisation software, providing powerful, up-to-date insights that drive operational efficiency and strategic decision-making in your firm. Read more here.
Featured also are free article previews, including from David Green of RACO, tips for law firms, service guides, and lots more…
Read issue here.
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SCAM ALERTS
The website ‘lawsonandcosolicitors.com’ is operating while misusing the name of Lawson and Co.
The SRA has warned that a website at ‘lawsonandcosolicitors.com’ is operating and misusing the name of a genuine firm of solicitors.
The website provides the address of ’10 Cole Street, #3. London Se1 4ld’
Please note that the SRA does not authorise and regulate a genuine firm of solicitors with the address of ’10 Cole Street, #3. London Se1 4ld’
Any business or transaction through the website at ‘lawsonandcosolicitors.com’ or the address of ’10 Cole Street, #3. London Se1 4ld’ is not undertaken by a firm or individual authorised and regulated by the SRA.
Please note, however, that the SRA does authorise and regulate a genuine firm of solicitors called Lawson and Co. Lawson and Co confirmed that they do not have any connection to the alert mentioned above.
The SRA authorise and regulate a number of genuine firms of solicitors with the name of Lawson or Lawsons in its name. The SRA believe that they do not have any connection to the alert mentioned above.
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Emails misusing the names of Steven Butchart and MSB Solicitors Limited
The SRA has alerted the public that emails falsely claiming to be from a genuine solicitor at a genuine firm of solicitors are circulating.
The emails are in relation to cryptocurrency transactions and were sent from the email address ‘stevenbutchart@msbsolicitors.com’.
Please note, that any business or transaction through ‘stevenbutchart@msbsolicitors.com’ is not undertaken by a firm or individual authorised and regulated by the SRA.
Please note, however, that The SRA does authorise and regulate a genuine firm of solicitors called MSB Solicitors Limited.
The firm’s genuine head office address is 1st Floor, 4 St Pauls Square, Liverpool, L3 9SJ. The firm’s genuine telephone number for its head office address is 01512819040.
The firm’s genuine email domain ends in ‘@msbsolicitors.co.uk’ (not ‘.com’).
The SRA also authorises and regulates a genuine solicitor called Steven John Butchart who is a solicitor at the genuine firm.
The genuine firm of MSB Solicitors has confirmed that neither it nor its Steven Butchart have any connection to the emails referred to in the above alert.
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Be cautious: Letter misusing the name of Birketts LLP
The SRA has been advised that a letter purporting to be a formal notice of assignment has been sent to tenants of an accommodation block misusing the name, address and SRA ID of a genuine firm of solicitors.
The letter seen by the SRA advises the recipient that the previous landlord’s interest in the property was transferred to a new landlord named Mr Michael Leach. The new landlord’s address is provided as Little Dene, 4 Maxwell Drive, West Byfleet, KT14 6BZ. The telephone number of 07351 339520 and email address of michaelstevenleach@hotmail.com is also provided. The letter advises that all future payments of rent should be paid to the new landlord and contains bank details.
Please note that the SRA authorises and regulates a genuine firm of solicitors called Birketts LLP, whose SRA ID is 441849. It has a branch office address of Brierly Place, New London Road, Chelmsford, CM2 0AP and telephone number is 01245 211211.
The genuine firm Birketts LLP has confirmed that it has no connection to the above letter.
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
