Hefty AML fine for firm that facilitated vendor fraud


Anti-money laundering: Firm failed to verify client ID documents

The Solicitors Regulation Authority (SRA) has handed out three more hefty fines for anti-money laundering (AML) failures, one for a firm that facilitated a vendor fraud as a result.

South Wales firm Stephens Wilmot failed to verify its client’s identification documents and then did not act upon the ‘Refer’ decision in an AML report.

As a result, the firm remitted £110,910 to an unrelated third party.

In a notice published this week, the SRA fined it £19,383 given that “the misconduct had a hand in facilitating vendor fraud”, causing substantial harm.

The SRA’s fining guidance placed the conduct in a band with a financial penalty of 1.6% to 3.2% of annual domestic turnover.

Stephens Wilmot’s fine was at the lower range of this in light of multiple mitigating factors: it made an early admission and co-operated with the SRA; the firm has remedied the breaches; the money was returned; and the conduct “was not reckless or intentional”.

We reported earlier this week that the SRA had added the growth in vendor fraud to its updated sectoral AML risk assessment.

Meanwhile, Northumberland firm Carpenter & Co has been fined £12,772 for not having a documented firm-wide risk assessment between June 2017 and December 2022, and then drafting an inadequate one because it was not tailored to the firm.

The SRA said it did have “numerous policies and procedures in its office manual” but these did not amount to a complaint risk assessment, which was finally put in place in May 2023.

Carpenter & Co also did not have the required policies, controls and procedures in place to October 2018 and then had inadequate ones, which it only remedied in July 2023.

Further, in one file reviewed by the SRA, the firm failed to conduct adequate source of funds checks.

In deciding to fine the firm, the regulator said: “The conduct showed a neglect towards statutory and regulatory obligations and had the potential to cause harm, by facilitating dubious transactions that could have led to money laundering (and/or terrorist financing).”

But there was no evidence of harm and “a low risk of repetition”. The firm had “shown remorse for its actions”.

This decision included much greater detail about how the fine was reached, with the SRA and firm agreeing that it was in a band when required a basic penalty of 1.6% of turnover.

Carpenter & Co’s was just shy of £1m, but the amount was then reduced by 20% to reflect the “urgent steps” it took to bring itself into compliance and co-operation with the SRA.

Surrey firm TP Legal has been fined £12,181 on largely the same basis as Carpenter & Co – not having a firm-wide risk assessment or policies, controls and procedures in place between June 2017 and spring 2023.

Its fine was based on 2.4% of turnover, taking into account co-operation with the SRA, remedying the breaches and there being no evidence that actual harm had materialised.

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




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