AML: Training was “not formal in nature”
An experienced solicitor who had an “implacable belief that he was right” and so did not think he needed to check anti-money laundering (AML) rules has been fined £45,000 for breaching them.
Peter Kenneth Felton Gerber, 64, “simply believed that [the rules] did not apply to him, and he adopted a cavalier approach to them”, the Solicitors Disciplinary Tribunal (SDT) found.
“To believe that experience alone is an ample substitute for formal training was misguided,” it went on.
This all manifested itself, among other failures, in him falsely telling prospective professional indemnity insurers in 2021 that all current and former staff over the previous six years had received formal anti-money laundering training.
Mr Gerber, who qualified in 1991, ran Kent firm Feltons Law. He made his staff redundant in August 2020, leaving him as a sole practitioner.
The SDT also found that, between 2017 and 2022, he did not have in place a firm-wide risk assessment (FWRA) – despite having told the Solicitors Regulation Authority in 20202 that he did – customer due diligence measures or AML policies, controls and procedures.
Further, he allowed the firm’s client account to be used as a banking facility for a month in 2020, with £4.4m passing through it, while he held residual client balances totalling nearly £34,000 on two matters that sat there for over two years.
The SDT said that “broadly speaking” Mr Gerber admitted the factual context of all the allegations but not that his conduct lacked integrity, was dishonest or reckless.
Among other things, Mr Gerber said he genuinely believed his staff had been properly trained on AML, “albeit that their training was not formal in nature”, while the FWRA “was in his head” – “as a sole practitioner he saw no merit in reducing it in writing for himself to read”.
The SDT accepted that, although these beliefs were unreasonable, they had been “genuinely held”. The false declarations made to the insurer and the SRA were reckless rather than dishonest, it found.
“In [Mr Gerber’s] world view he had genuinely believed that he was justified in answering as he did, in his mind he had been truthful and not dishonest albeit others would have considered his belief an unreasonable one.”
He had also lacked integrity: “The declarations he made were false and he made no effort prior to or afterwards to review and reassess his practice in this regard.”
The solicitor did not take opportunities to review his procedures “and it took at least another two years” for him to take remedial action”.
The ruling continued: “His approach in this regard was pedestrian in the extreme. It was only when the SRA imposed a restriction on his practising certificate that he finally took advice and put the necessary written FWRA and AML policies in place and attended relevant, formal training as required by the regulations. This placed his clients at risk…
“His motivation, if it could be so characterised, had been his implacable belief that he was right and he had not needed to check the requirements imposed upon him by the AML regulations.
“He simply believed that they did not apply to him, and he adopted a cavalier approach to them manifesting in his answers to the insurance application and the various declarations he made.”
It accepted from his hitherto unblemished history and character references that Mr Gerber “was held in high regard by professional colleagues, his clients and others”.
His remorse was “sincere and genuine, [and] he may have been struggling to some extent as a sole practitioner”.
While Mr Gerber’s insight on the potential harm to which he had exposed clients was “limited”, there had been “no loss to any party, no unwarranted gains to the respondent and no one’s vulnerabilities exploited”.
Mr Gerber had fallen “far short of the standards of integrity and probity expected of a solicitor and in the circumstances the level of seriousness of the misconduct was high”.
A fine of £45,000 was the appropriate sanction, along with conditions preventing him from practising as a sole practitioner, being a partner, taking a compliance management role, holding client money, and being a signatory on any client account.
The solicitor told the tribunal that, with the burden of regulation on sole practitioners “extremely high”, he was in the process of merging his firm with another, which “would now likely go ahead now that the spectre of dishonesty had gone”.
The SDT suspended imposition of the conditions by 12 weeks to allow this to happen.
Mr Gerber was also ordered to pay costs of £60,000.
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