Money laundering: No evidence of actual harm caused
A Southend law firm that failed to comply with anti-money laundering (AML) rules for more than 15 years has been fined £120,000 by the Solicitors Disciplinary Tribunal (SDT).
It said a “well-established firm” of the “size and level of resources” of Tolhurst Fisher “ought reasonably to have known that the misconduct was in material breach of its obligations to protect the public and the reputation of the legal profession”.
The firm failed to have in place a compliant firm-wide risk assessment, the required policies, controls and procedures, and client and matter risk assessments as required first under the Money Laundering Regulations 2007 and then by the updated 2017 regulations.
Such documentation as was in place was deficient in multiple ways and was neither reviewed nor updated as it should have been.
Further, a review of two sample files – one of a conveyancing transaction, the other the purchase of a business – showed a failure to conduct any or adequate source of funds inquiries.
In a statement of agreed outcome and proposed sanction approved by the SDT, the Solicitors Regulation Authority (SRA) said: “Absent credible explanations, the firm was in no position to determine whether enhanced due diligence was required, and if so in what form, nor to conclude that it had taken all indicated steps to ensure it did not assist in the facilitation of money laundering.”
The firm’s conduct could not be described as “singular or fleeting, in fact spanning a time-period of over 15 years”, the SRA went on.
As well as legislation, the profession had also been issued with guidance and warnings during this time, but still Tolhurst Fisher failed to comply – in some periods it had no, as opposed to inadequate, safeguards in place.
This is the kind of SDT case that will soon not happen, however, once the SRA activates its new power to levy unlimited fines in cases of economic crime – a process it revealed earlier this month that it has initiated.
As Tolhurst Fisher is a traditional law firm, rather than an alternative business structure, the SRA can currently only fine it up to £25,000 – it has been doing this a lot over the last couple of years in similar cases of AML breaches involving smaller firms.
We reported recently that it has fined 50 firms £575,000 between them over the last six months and has on occasion trimmed a fine to £25,000 so as to avoid an SDT referral. But it is likely that this was not considered appropriate in Tolhurst Fisher’s case.
The SDT accepted that there had been “no evidence that any actual harm had been caused” by any of the firm’s admitted failures.
But it “risked causing harm to the reputation of the legal profession”, and the misconduct was aggravated by the length of time it lasted.
The tribunal gave “due regard” to mitigating factors, including the firm’s full cooperation with the investigation and admission of misconduct, and that it had taken “active steps” to remedy its failures. It also had a “previously unblemished regulatory record”.
Having considered the “seriousness of the misconduct, as well as the firm’s size, financial resources, and revenue”, the SDT concluded that a fine of £120,000 was proportionate.
It also ordered Tolhurst Fisher to pay costs of £25,290.
An initial version of this story wrongly named Martin Tolhurst Solicitors instead of Tolhurst Fisher. We apologise for the error.
Leave a Comment