AML: Firm should have carried out independent audit
The Solicitors Disciplinary Tribunal (SDT) has fined an East London law firm £58,000 for anti-money laundering (AML) rule breaches over a six-year period.
The tribunal said there “seemed to have been no reason” why Huggins Lewis Foskett had not followed the regulations, and the lack of compliance “persisted for a long time”.
The SDT went on: “Compliance with the anti-money laundering regulations is required, both in respect of meeting legal and regulatory obligations and for the wider societal issue of such compliance being a key method of potentially disrupting serious crime.
“It was a matter of luck that the respondent had not been targeted by criminals exploiting the accepted deficiencies in its AML procedures and requirements under the regulations.”
However, the tribunal said the law firm’s “full admissions at an early stage” demonstrated some insight.
In an agreed outcome with Huggins Lewis Foskett, approved by the SDT, the Solicitors Regulation Authority (SRA) said the “long-established” firm practised as a traditional partnership.
This meant the SRA could not fine it more than £25,000 – which is almost certainly why it was referred to the tribunal – whereas alternative business structures (ABSs) can be fined up to £250m.
The SRA has said it is working to activate its new power to levy unlimited fines on all types of firms in cases of economic crime under the Economic Crime and Corporate Transparency Act 2023, which came into force last year.
The regulator said Huggins Lewis Foskett did not have a compliant firm-wide money laundering and terrorist financing risk assessment; the one it had was “deficient” on the “various geographic risks posed”, the products and services it provided and lacked detail on the firm’s client base.
The law firm admitted this and that it did not have compliant AML policies, controls and procedures in place.
The documentation in place lacked a long list of information, including measures to tackle politically exposed people or identify “unusually large or unusual patterns” of transactions, when it was necessary to apply due diligence and how high-risk jurisdictions were assessed.
The law firm also admitted failing to conduct client and matter risk assessments between 2017 and 2022, and from June 2017 until January 2024 failing to establish an independent audit.
The SRA said an audit was necessary, partly because of almost two-thirds of the firm’s work was conveyancing.
In mitigation, Huggins Lewis Foskett said admissions were made early and the firm was now regarded by the SRA as compliant.
The SRA said factors which aggravated the seriousness of its misconduct were that it continued “over a lengthy period of time”, and when the firm was made aware of the SRA’s outstanding concerns in December 2022, it did not take any action until contacted again by the SRA in January 2024.
The law firm was fined £58,000 by the SDT and ordered to pay costs of £20,000.
We have been reporting for some time the steady stream of fines handed out by the SRA for similar AML failures.
Since our last story a month ago, in which Kent firm TG Baynes, an ABS, was fined £64,000, there have been another 17, with the fines totalling £256,000. They are paid to HM Treasury.
Three of the firms – Gill Akaster in Plymouth, Sunderland-based Cooklaw and Harrowell & Atkins in Hertfordshire – saw the initial fine reduced by mitigation to exactly £25,000, so they would not have to be referred to the SDT.
The biggest fine in this group was £36,494 for Leicester firm Lawson West, an ABS, for failing to maintain records of its client and matter risk assessments over a period of three years.
Last month, a Legal Futures investigation highlighted how many of the firms that have been fined for AML breaches were members of the Law Society’s Conveyancing Quality Scheme and/or Lexcel scheme, raising questions about how rigorously the standards -which both require AML compliance – are policed.
Huggins Lewis Foskett is a member of CQS, as are 13 of the 17 fined by the SRA. One is Lexcel accredited.
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