AML: Partner was not aware policy existed
The Solicitors Regulation Authority (SRA) has fined an Oxfordshire law firm £20,000 after finding it “reckless” in failing to comply with the anti-money laundering (AML) requirements.
It is the highest sum so far imposed by the regulator since the limit of its fining power for traditional law firms was raised last year from £2,000 to £25,000.
The SRA said the lack of compliance “showed an AML control environment failing at the firm”.
In increasing the fining power, Lord Chancellor Dominic Raab said the SRA would be able to impose fines for a broader range of offences, including “failure to implement the appropriate checks required to uncover signs of money laundering by clients”.
In an agreed outcome published this week, the SRA said the AML policy provided by Oxfordshire firm Ferguson Bricknell at the start of its investigation “was undated and did not state the author of the policy”.
Having not been “regularly updated and/or maintained”, the policy referred to “outdated legislation, the MLRs 2007, throughout (the previous superseded iteration of the regulations) as opposed to the current MLRs 2017”.
Ferguson Bricknell, according to Law Society records, has two partners, one admitted in 1974, the other in 1979.
The SRA said one of the partners “was not aware that the policy existed”, which “itself demonstrates a lack of adequate training practices at the firm”.
Another partner, or possibly the same one, “had not received any AML training on the MLRs 2017”.
The SRA said the only AML training employees received was in the form of a “personal compliance booklet” on AML sent to them in January last year. It was dated 2016/2017 and referred to the “outdated and superseded MLRs 2007”.
The law firm “incorrectly made a declaration” to the SRA in January 2020, that its firm-wide risk assessment was compliant with the latest MLRs and in line with relevant guidance, when it was not. This was despite the SRA’s two warning notices in 2019.
The SRA said the risks associated with conveyancing, which accounted for around 75% of the law firm’s income, “should have been addressed on the firm-wide risk assessment but had been omitted”.
The firm lacked an independent audit function and “a partner at the firm had been unaware of this requirement under the MLRs 2017”.
A review of a sample of the firm’s client files revealed “weak ongoing monitoring (if at all) of transactions” and “no source of funds checks where funds were received from third-party sources”, despite incidences of this happening, and no due diligence.
No client or matter risk assessments had been undertaken and there was no documentary evidence to demonstrate how the firm had identified and assessed the level of risk.
Ferguson Bricknell admitted that it had, among other things, failed to maintain public trust in the profession, failed to comply with its legal and regulatory obligations and failed to run a business effectively.
The SRA said the misconduct “showed a disregard for statutory and regulatory obligations and had the potential to cause harm by facilitating dubious transactions that could have led to money laundering (and/or terrorist financing)”.
Although the misconduct was “reckless”, there was no evidence of harm to consumers or third parties, the firm assisted the SRA with the investigation and did not financially benefit from the misconduct.
In reaching the figure of £20,000, the regulator said “the substantial aggravating circumstances, and absence of mitigating factors” meant no discount was applicable.
The sum reflected “the seriousness of the identified breaches”.
Ferguson Bricknell also agreed to pay £1,350 in costs.
In its first use of the enhanced power, the SRA issued a £15,000 fine on a solicitor who failed clients subject to deputyship orders. It was criticised for not providing any detail on the case or the reasoning behind the fine; by contrast, there is considerable detail in the Ferguson Bricknell decision.
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