SRA issues fines exceeding £55,000 for AML compliance breaches

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AML: Inconsistent SRA notices

The Solicitors Regulation Authority has handed out more than £55,000 in fines to firms and individual lawyers in recent days for breaches of anti-money laundering (AML) requirements.

The largest was for Bristol firm Batchelor Sharp, which received a fine of £23,035, near the limit of the regulator’s powers, for not completing any client or matter risk assessments on its files prior to March 2023.

An SRA notice said: “Its conduct was a breach of its regulatory obligations which persisted for longer than was reasonable. It demonstrated a pattern of non-compliance.

“The firm was responsible for its own conduct which was serious and had the potential to cause serious harm to the public interest and to public confidence in the legal profession.”

The firm’s conduct placed it in the fining band of 1.6% to 3.2% of its annual domestic turnover.

“However, as the firm had not acted dishonestly or lacked integrity, there was no material harm caused and it had taken proactive steps to come into compliance with its AML obligations prior to the AML desk-based review [which led to the fine], the firm’s conduct was placed at the bottom end of this bracket.”

North-West London firm Burrows was fined just shy of £13,000 for not having a firm-wide risk assessment or fully compliant policies, controls and procedures (PCPs) in place between June 2017 and March 2022.

Further, on five sampled files, the firm failed to carry out client and matter risk assessments.

The SRA said the risk that these failures represented was “heightened” given the high proportion of Burrows’ work that was ‘in scope’ of the 2017 Money Laundering Regulations.

Showing the inconsistency in the detail contained in different SRA’s notices, this one specified that the fine, which was in the same band at Batchelor Sharp’s, was placed in the middle at 2.4% of turnover.

Kolawole Babatunde Idowu was a partner and owner of South-East London firm Fitzpatrick & Co, which closed in December 2022. He was responsible for the firm’s AML compliance at both firm and file level.

The SRA identified seven property sales which HM Land Registry (HMLR) initially refused to register, owing to concerns about the identification and verification documents obtained. Cumulatively this was a breach of the 2017 regulations, the SRA said.

Mr Idowu was also responsible for the firm’s compliance with the accounts rules and the SRA identified two payments totalling £34,000 which did not relate to the underlying legal transaction.

Under its fining guidance, the SRA rated the misconduct as ‘more serious’, with a medium impact/risk of harm.

It continued: “Aside from the seven cases relied upon by the SRA, Mr Idowu has stated (and we accept the same) that he experienced widespread failures by HMLR to register transactions, involving clients with foreign citizenship, in respect of which all were subsequently registered by HMLR (after identification and verification documents had been clarified).”

This led to a penalty of £2,376; how it was calculated was not clear from the notice.

Finally, AML breaches were part of the findings against Siamak Goudarzi of Southampton firm Leonard Solicitors for his conduct when acting in various conveyancing transactions between December 2020 and January 2022:

• Causing or allowing the firm’s client account to be used as a banking facility by two clients;
• Failing to undertake proper client due diligence or source of funds checks on four files in circumstances where money was received piecemeal, from third parties and/or foreign jurisdictions;
• As a registered foreign lawyer, undertaking reserved legal activity without a suitably qualified supervisor; and
• As a manager and owner of the firm, failing to ensure that the firm complied with the 2017 regulations by having a compliant firm-wide risk assessment, PCPs, and a nominated money laundering reporting officer.

He was ordered to pay a fine of £18,750, with the SRA saying he has “remediated some of the harm caused by his misconduct” and brought the firm into compliance.

Each firm and lawyer was ordered to pay the SRA costs of £1,350.