AML: Firm has brought itself into compliance
A law firm that did not have the processes in place to cope with acting for a politically exposed person (PEP) on multiple property transactions has been fined £16,100.
A Solicitors Regulation Authority (SRA) notice said Leadenhall Law Group in Norwich acted for a non-domestic PEP and their associated companies across 14 residential property purchases between March 2017 and January 2020.
The Money Laundering Regulations 2017 impose enhanced checks when acting for a PEP, namely having approval from senior management for establishing or continuing the business relationship with the PEP, adequate measures to establish the source of wealth and funds, and conducting enhanced ongoing monitoring of the relationship.
But the SRA established that Leadenhall did not have the systems in place “to adequately identify the client as a PEP or establish the PEP’s source of funds/wealth”.
It admitted multiple rule breaches as a result.
A fine was appropriate “to maintain professional standards and uphold public confidence in the solicitors’ profession”.
The SRA went on: “PEPs are high-risk clients (holding positions of power and influence, making it easier to obtain funds via corruption or by stripping assets of their country of origin) and the measures as set out in the Money Laundering Regulations specifically have sections dedicated to PEPs requiring additional scrutiny to be applied to mitigate the increased risk.
“The firm did not identify its client as a PEP but did recognise the high-risk nature of the client. Despite this, in practice, the required actions as specified in the Money Laundering Regulations were not adequately executed.”
Based on the firm’s turnover, the SRA’s fining guidance meant a basic penalty of £17,880, which it reduced by 10% to £16,092 given that Leadenhall had co-operated with its investigation and ensured that it was now compliant.
The telling part is that the firm correctly identified the client as high risk — and then the enhanced checks simply didn’t happen, fourteen times. In my experience that’s rarely negligence and usually process: the risk assessment lives in one system, the matter moves in another, and nothing forces the two to meet. Worth every firm asking what actually happens after a file gets flagged high risk, because ‘we’d notice’ isn’t a control.