Legal Service Providers Sanctioned For Money Laundering

| General


In late December 2022 the Solicitors Regulation Authority handed down its decision to a Yorkshire based legal services provider in connection with unprofessional conduct in relation to money laundering. 

What Happened In The Case?

The judgment appears to have emerged after the Regulator launched a probe of an investigatory nature into the provider during which it seems to have identified numerous worrying issues in connection with the legal service provider’s adherence to money laundering standards.

Be Sure Your Sins Will Find You Out…

When the Regulator examined the matters in slightly more detail it found that the provider had neglected to have in position any money laundering risk-assessments and had not implemented its suggested approach on money laundering prevention. On 23rd October 2020 the firm purported its adherence with Money Laundering Regulations. However, the Regulator found that such no measures were in place until November 2020.   

Lessons Learned? 

Those tasked with running legal service providers need to be carefully considering the impact of this case and taking action such as: 

  • introducing risk assessments to with a view to identifying activity which could be perceived as Money Laundering
  • ensuring risk assessments are conducted
  • maintain the procedures over the long term
  • make sure questionable issues, red-flags and hallmarks can be spotted regarding money laundering 
  • bring in a culture whereby staff are identifying proverbial red flags which identify Money Laundering activity. 
  • some red flags for Money Laundering activity include but are not limited to:
  • out-of-the-ordinary clients, transactions and sources of monies
  • clients conducting themselves in an non-cooperative manner
  • left field variations in directions received from clients and
  • transactions involving:
  • client monies, 
  • business formation, 
  • property transactions and 
  • trusts. 

Long Journey Starts With A Single Step?

Faced with this situation legal professionals may feel the need to seemingly reach for the panic button and report such perceived red flags to the particular Money Laundering Reporting Officer or the National Crime Agency. However, before doing so lawyers spotting red flags need to be compiling the relevant paperwork in connection with the particular suspected identified suspected money laundering activity. They also need to see the bigger picture by seeking a reasonable explanation. As a next cautious step, legal professionals should be encouraged to identify whether there is any suspected activity connected to money laundering related to property of a criminal naturev. The most helpful starting point for any legal professional in this situation is provided by the Law Society. It advises that where there is no property of a criminal nature, the activity cannot be interpreted or defined as money laundering.    

The Law Society advises that where legal professionals identify such red flags and property they should be:

  • gather and collate details regarding the criminal activity
  • for example, documentary evidence such as charge sheets, press releases in the media and other sources appearing to be connected to criminal activity related to illicit substances
  • information related to tax offences, fraudulent representation connected to welfare benefits and other related criminal offences
  • putting the pieces together and 
  • arriving at the interpretation that the activity can be regarded as money laundering. 

The Law Society in their eminent wisdom advise legal professionals in this situation to carefully check whether the typical client factors match the vast proportion of monies from a private perspective. If these two forces are not seemingly in alignment, this should be a red flag and a report to the Money Laundering Reporting Officer employed by the provider of legal services and the National Crime Agency will be justified.    

ASSESSING FIRMS

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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES 

[SOURCE 1] Castro, Bianca – Firms fined following SRA anti-money laundering clampdown – Law Society Gazette – 6th January 2023 - Firms fined following SRA anti-money laundering clampdown | News | Law Gazette

[SOURCE 2] Solicitors Regulation Authority – Solicitors Regulation Authority – 20 December 2022 - SRA | Hallam Solicitors - 494741 | Solicitors Regulation Authority

[SOURCE 3] Rule 3.1 SRA Regulatory and Disciplinary Procedure Rules

[SOURCE 4] Rule 9.2 SRA Regulatory and Disciplinary and Disciplinary and Procedure Rules

[SOURCE 5] Rule 10.1 and Schedule 1 SRA Regulatory and Disciplinary and Disciplinary and Procedure Rules

[SOURCE 6] Money Laundering, Terrorist Financing (Information on the Payer) Regulations 2017

[SOURCE 7] SRA Principles 2011

[SOURCE 8] SRA Code of Conduct 2011

[SOURCE 9] SRA Principles 2019

[SOURCE 10] SRA Code of Conduct for Firms 2019

[SOURCE 11] Regulation 18 Money Laundering Regulations 2017

[SOURCE 12] Law Society – Warning signs of money laundering – 20 January 2020 - Warning signs of money laundering | The Law Society

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