- Publication Date
- 2023-10-20
The Solicitors Regulation Authority (SRA) carried out an investigation into the law firm, based on intelligence received from a complainant. The investigation identified areas of concern in relation to the firm's compliance with the Money Laundering, Terrorist Financing (Information on the Payer) Regulations 2017 (MLRs 2017).
Concerns were raised regarding a property transaction carried out by the firm, where it was alleged that the firm miscalculated the complainant's Stamp Duty Land Tax (SDLT) liability. The complainant, entitled to a full refund as a first-time buyer in the UK, did not receive his monies. Additional concerns related to the undervaluation of the house compared with similar properties in the same street, and the high legal costs for the conveyancing transaction.
Further investigation revealed that the firm relied upon customer due diligence (CDD) and source of funds (SoF) checks provided by a Ukrainian lawyer, at a Ukrainian law firm. Several issues were identified during the file review: - Enhanced customer due diligence (EDD) was required but inadequately applied. - Client and matter risk assessments were either not performed or not retained. - The SoF documentation relied on a letter from the Ukrainian law firm. - The firm did not adequately scrutinize the SoF documents or delve into the background information provided. - The SoF transaction totaling £295,000 did not pass through the firm's client account, impeding accurate tracking and scrutiny of the funds' origin. - Reliance was placed on statements that the funds were transferred between parties in Ukraine.
The firm failed to adequately consider the SRA's warning notice on Money Laundering and Terrorist Financing.
The following breaches of the MLRs 2017 were admitted: - Failure to exit the business relationship despite red flags. - Incorrect reliance on CDD and SoF performed by a firm based in Ukraine. - Inadequate identification at the outset that the third-party solicitor had been previously struck off by the Solicitors Disciplinary Tribunal. - Failure to apply EDD adequately.
The firm admitted to failing to comply with money laundering legislation, affecting public trust and compliance with various SRA Principles and regulatory requirements from both the 2011 and 2019 codes.
Following these findings, the law firm offered a genuine apology and implemented enhanced regulatory training and appointed a new MLRO and MLCO who have reviewed and updated the firm's AML approach.
The SRA determined a financial penalty was appropriate to maintain professional standards and uphold public confidence in legal services. The basic financial penalty was set at 0.4% of the firm's annual turnover, equating to £20,120. Given the firm's cooperation throughout the investigation, the penalty was reduced by 40% to £12,072.
The implementation of these measures and the cooperative attitude demonstrate the firm's commitment to rectifying the identified issues and enhancing compliance with relevant regulations.