A trio of fines for money laundering breaches handed down by the SRA at the end of April 2024 have highlighted the dangers of non-compliance by smaller and medium sized law firms. The fines total over £45,000 and in each of the three cases, basic money laundering due diligence was not done, or the correct policies and procedures were not put in place.

The decisions come as the SRA flexes its new fining powers, with at least ten decisions on AML breaches in the first quarter of 2024 alone. These cases saw fines of almost £170,000. With the trio of fines in April, the average AML fine for a small or medium size d law firm falls between £10,000 to £25,000.

The cases revolved around a failure to property conduct due diligence on clients and third parties, and failing to properly assess matter risks. Due diligence wasn’t done on funds coming from other jurisdictions and enhanced due diligence wasn’t done, nor was due diligence completed before accepting funds, and firm AML policies controls and procedures were not fully in place. 

Obaseki & Co Ltd SRA fine

Obaseki & Co were fined £9,000 plus £1,350 in costs for failing to comply with the MLRs 2017 in a conveyancing case, failed to promptly return client money and caused improper transfers from the client account to the office account. The firm was acting for a conveyancing transaction where it failed to conduct proper client due diligence despite accepting £500,000 into its client account from an unconnected third party that was outside of the jurisdiction. There was no explanation given for this transfer, and no evidence of the source of funds.

The SRA found that Obaseki & Co failed to perform adequate client due diligence, failed to perform a source of funds check, failed to perform ongoing risk assessment checks, ongoing monitoring, enhanced due diligence and failed to maintain proper files and documentation.

Despite the breach, the AML issue was found on only one file and the firm amended its internal AML guidance. The resulting fine was 2.4% of annual domestic turnover.

Albert Partington SRA fine

Albert Partington, a solicitor and director of Ogden Lyles & Fox was fined £11,013.67 by the SRA and ordered to pay costs of £1,350 for failing to undertake adequate client due diligence despite the conveyancing transaction containing red flags as indicated in the SRA Warning Notice on Money Laundering and Terrorist Financing. Mr Partington failed to check and verify identity documents received from a third party and had allowed his firm’s client account to be used as a banking facility for his family’s matters.

Mr Partington also allowed a conflict of interest to happen between his own interests and those of his client by allowing a family member to make financial loans to two clients while charing 10-12% interest. Adequate due diligence was not conducted on the transfer of a property, breaching the MLRs 2017. He acted for both the buyer and the seller on a transfer of a property and failed to take instructions from the seller. The property was transferred from a mother to her son at an undervalue. The SRA were particularly concerned given this conduct spanned several years and multiple transactions. He also held the roles of MLRO and compliance officer at the firm and failed to act on clear hallmarks of fraudulent transactions.

Fairhurst Menuhin and Co Ltd SRA fine

The firm was fined £23,930 and ordered to pay costs of £1,350 for significant anti-money laundering failings. The firm did not have proper controls and procedures in place, and failed to undertake proper matter risk assessments and failed to certify client ID before accepting money on conveyancing transactions. The SRA found that six of the firm’s files did not have client/matter risk assessments, and the funds were received prior to completing due diligence. 

Mitigating factors in the case were that the firm had staff training and email reminders on ID and AML checks. The firm also cooperated with the SRA, took steps to remedy the issues, and there was no evidence actual harm had happened. The fine totaled 2% of the firm’s annual domestic turnover.

Other recent AML fines against small and medium sized law firms

Austen-Jones Solicitors Limited were fined £15,202 for failing to train staff on AML, and not having the required documentation in place for a firm undertaking conveyancing.

Batchelor Sharp were fined £23,035.50 for failing to undertake client and matter risk assessments on five different files.

Stephens Wilmot Ltd were fined £19,383 for failing to complete due diligence in a conveyancing transaction, resulting in a fraud of over £100,000.

Hine Downing LLP were fined £20,870.68 for AML policy failings.

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