Money laundering: three breaches of regulations
A highly experienced solicitor who breached the Money Laundering Regulations 2007 in a property transaction that led to a £500,000 fraud did not act dishonestly, the High Court has ruled.
As a result, it dismissed a subrogated claim brought by the insurers of London law firm Pemberton Greenish to make her cover what they had to pay out.
Mr Justice Jeremy Baker said that the various breaches of the regulations by Jane Margaret Henry were “evidence of a serious lack of professional care”, while attempts to cover up her errors after the fraud had been uncovered were “dishonest”.
“However, despite these matters, I am not persuaded that the defendant’s actions and omissions leading up to the fraud being uncovered were dishonest.” There was no suggestion she was actually part of the fraud.
Ms Henry, 64, worked for various “prestigious” City firms, mainly on corporate and commercial transactions, and in 2009 was approached to join Pemberton Greenish, which is based in Chelsea. She chose to do so as a consultant, rather than partner.
The judge recounted that “unfortunately, during this period, the defendant’s personal life took a turn for the worse, when her domestic partner, Peter Lloyd-Cooper, who was also a solicitor and a partner at Kennedys LLP, was the subject of an investigation into suspected financial irregularities at work”.
This eventually led to him being struck off by the Solicitors’ Disciplinary Tribunal (SDT), while Kennedys commenced proceedings for recovery of the monies from him. “In late 2011, the defendant’s ability to maintain possession of their joint home was in jeopardy,” the judge said.
The events that led to this case took place in December 2011 when she acted for a couple who wanted to mortgage an investment property for a short-term loan for business purposes.
The deal turned into a deferred sale agreement with another lender, and £500,000 was received and distributed to third parties by Ms Henry according to the clients’ instructions.
It was only when the Land Registry wrote to the registered owners to enquire whether they objected to the registration of a charge on their property that the fact the transaction had been fraudulent emerged, as they knew nothing about it.
In the aftermath, Ms Henry, belatedly realising that the written authorisation to complete the transaction had not been returned, forged the clients’ signature, which she told the court she did out of fear. She also deleted all emails that referred to Mr Lloyd-Cooper – he had a role in introducing the clients and later in aspects of the transaction on their behalf.
She said this was to protect his “very fragile” mental health at the time. The emails were, however, recovered. There is no suggestion either that Mr Lloyd-Cooper was involved in the fraud.
Her consultancy was terminated and in late 2012, she accepted a police caution for an offence under the Forgery and Counterfeiting Act 1981, arising from the false written authorisation. In 2015, she too was struck off the SDT, with dishonesty found over the authorisation.
Some of the money was recovered but the insurer ended up paying out £370,000, which it sought to recover from Ms Henry. The judge said the issue before him was whether the insurer could establish that its losses were caused as a result of Ms Henry’s dishonest acts or omissions.
Baker J found three breaches of the Money Laundering Regulations 2007: the lack of appropriate scrutiny of a council tax bill which had been provided by the clients; the lack of reference to, and the identification of, one of the clients within the firm’s anti-money laundering system; and Ms Henry’s omission to correct the entry in the firm’s matter recording system when the nature of the transaction changed and she was instructed to pay the proceeds to third parties.
He said that when one of the clients first visited her offices, Ms Henry was entitled to treat him as legitimate. “Furthermore, it is clear that, from the outset, there was a considerable degree of urgency concerning the completion of the loan, and then sale agreement.
“Although… this latter factor was not a sufficient excuse to avoid liability under the Money Laundering Regulations 2007, I do consider that it is of relevance when considering whether these were dishonest omissions by the defendant.”
The judge also took into account the role played by Mr Lloyd-Cooper: “I am satisfied that the defendant had genuinely convinced herself, not only of the lack of need to scrutinise Mr Lloyd-Cooper’s role with more care, but also that, on the contrary, his involvement provided considerable assurance to her about the probity of others involved.”
It was this, too, which led to her actions after the fraud was discovered, Baker J said, because she felt he had been the victim of injustice.
The judge concluded that he was “not persuaded that the defendant’s actions and omissions leading up to the fraud being uncovered were dishonest”.
He said it was the push to complete the transaction quickly which caused Ms Henry to overlook the requirements of the 2007 regulations.
He finished: “In these circumstances, although the claimant has satisfied me that the defendant committed various breaches of the Money Laundering Regulations 2007, I am not satisfied that there is sufficiently cogent evidence that its losses were caused as a result of the dishonest acts or omissions of the defendant.”
Leave a Comment