Russia: Firm distributed money for client
A law firm run by an ex-Law Society president has been fined £68,000 for anti-money laundering failures, including allowing $23m to pass through its client account with no underlying legal work.
The Solicitors Regulation Authority (SRA) was able to fine Scott-Moncrieff & Associates, a virtual law firm set up by Lucy Scott-Moncrieff, more than the standard £25,000 limit because it is an alternative business structure. It can fine those up to £250m.
An SRA notice published yesterday said an inspection in 2022 found that none of the firm-wide risk assessment, policies controls and procedures (PCPs), matter risk assessments, ongoing monitoring, and customer due diligence were compliant with the 2017 Money Laundering Regulations.
It recommended that the firm – known as ScoMo – should immediately address the concerns and provided the firm with guidance to support it in doing so, while also referring it for formal investigation.
This began the following July and identified that a consultant at the firm acted for a client located in the Russian Federation in relation to its purchase of an asset for $22.5m from a Canadian company.
ScoMo agreed to provide escrow services and general advice to the client but did not act in the sale and purchase agreement for the asset. There was “no need for it to receive or make payments relating to that underlying transaction”, the regulator said.
However, during 2021, it had received three sums into its client bank account from the client totalling $23.3m and made three payments totalling $22.5m to the company supplying the asset. On the client’s instructions, the firm also paid $525,000 to the client’s agent, located in Germany, and $262,500 to another company located in Estonia.
This amounted to providing a banking facility, according to the SRA.
A further investigation in 2023 found that the PCPs were not still compliant and did not incorporate the guidance provided the previous year.
The SRA calculated the fine at 2% of ScoMo’s turnover. It described the misconduct as serious, given the importance of the Money Laundering Regulations, the risk that its client account “may have been used for money laundering, terrorist financing or other illegal or improper purposes”, and the length of time for which the firm was in breach of its regulatory obligations.
Separately, Ian Insley, the consultant solicitor who was responsible for the banking facility breach, has been fined £9,941, 27% of his annual income.
“In allowing the firm’s client account to be improperly used as a banking facility Mr Insley acted with a wilful or reckless disregard of harm and his regulatory obligations,” the SRA said.
Both ScoMo and Mr Insley were each ordered to pay £1,350 in costs as well.
Ms Scott-Moncrieff said: “The publication of the SRA decision was unexpected, as we had appealed to the SDT and are currently awaiting its written reasons for rejecting our appeal, at which point we will decide whether to appeal the SDT decision.
“As the case has not concluded, it is not appropriate to comment on the issues at this stage, but we look forward to explaining the full facts in due course.”
Ms Scott-Moncrieff was president of the Law Society in 2012-13 and sits as a judge in both the Court of Protection and the Mental Health Tribunal. She is a former judicial appointments commissioner and House of Lords conduct commissioner.
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