- Publication Date
- 2023-11-24
The Solicitors Regulation Authority (SRA) conducted an investigation following a report made by the law firm. The investigation identified concerns regarding the firm's compliance with the Money Laundering, Terrorist Financing (Information on the Payer) Regulations 2017 (MLRs 2017).
The investigation focused on three conveyancing transactions, carried out by the firm between October 2017 and March 2018, where it acted on behalf of the purchaser. In all three matters, the firm received instructions from a third-party property investment company, which was instructed by the purchasers of the properties.
The firm was instructed in the purchases of properties for £3.2m and £550,000 on behalf of Client A, a limited company. A review of the client files identified concerns about conflicting information regarding the ultimate beneficial owner and the inadequately understood and evidenced source of funds, which had changed during the transaction. These issues were raised by the firm's compliance team but were only purportedly addressed in a conversation with the fee earner, without adequate written records to confirm resolution before the transactions were completed.
A retrospective search by the firm identified a potential link between one of the purported beneficial owners and an entity subject to UK sanctions. Electronic AML searches were not carried out for this individual at the time of the purchases. Consequently, the firm did not mitigate sanctions risk, presenting a significant risk that these purchases were funded through a sanctioned entity.
In another transaction, the firm was instructed to act on behalf of a UK registered charity, Client B, in the purchase of a property for just over £3m. The firm had previously acted for a different client in relation to this property before changing to Client B. The source of funds documentation revealed that Client B did not have sufficient funds to complete the purchase, with the balance being loaned to the charity from one of its trustees. The file lacked source of funds information for these funds and customer due diligence documentation for the trustee.
The firm's compliance team questioned the source of funds without considering any AML risks based on the status of Client B as a UK registered charity.
The firm admitted to the following breaches of the MLRs 2017:
- Failure to identify and verify the beneficial owner of Client A and to scrutinise the source of funds across all three transactions.
- Failure to carry out enhanced customer due diligence and ongoing monitoring despite the complex corporate structure and the high-value nature of the transactions.
- Failure to obtain independent reliable sources to verify information for Client A and to retain documents and information to satisfy the customer due diligence requirements.
The firm admitted failing to comply with the MLRs 2017, thereby not maintaining public trust in the firm and the provision of legal services, not carrying out business effectively in accordance with proper governance and sound financial and risk management principles, and not complying with relevant legislation for legal businesses, including anti-money laundering and data protection laws.