Law firm rebuked for AML failure caused by third-party ID checker


Money laundering: Firm tricked by ‘client’

A law firm has been rebuked after a failure to perform proper due diligence on the identity of a client – for which it relied on a third party – led to a fraudulent property sale.

Yorkshire firm Schofield Sweeney accepted the sanction from the Solicitors Regulation Authority (SRA) in a regulatory settlement agreement that means it will not have to face a disciplinary tribunal.

In June 2018, the firm agreed to act for ‘Mr A’ in the sale of a residential property which he purported to own.

The firm never met Mr A in person, meaning it had to conduct enhanced customer due diligence to verify Mr A’s identity.

He provided copies of his ID documents certified by a genuine third party. However, the agreement said, the client identification process carried out by that third party did not comply with the money laundering regulations.

“The third party had only certified that the ID documents were true copies of the original documents. It had not however actually verified the genuine identity of Mr A.”

Schofield Sweeney accepted and relied upon this. The property was sold soon after and the proceeds sent to Mr A.

Six weeks later, the Metropolitan Police told the firm it was investigating suspicions that the sale was fraudulent.

Though Schofield Sweeney notified its indemnity insurer the next day, it did not tell the SRA for more than 10 months.

The firm admitted it had committed multiple breaches of the code of conduct. In mitigation, Schofield Sweeney pointed out that this was an isolated incident and there was no pattern of this type of misconduct.

Further, it has taken remedial action to mitigate the harm suffered by the buyers and the genuine owner of the property and taken steps to ensure it carried out adequate client due diligence in the future.

The agreement said a written rebuke was appropriate given that there was “no evidence of lasting harm to consumers or third parties” and “a low risk of repetition”.

“A public sanction is required in order to uphold public confidence in the delivery of legal services,” it added.




    Readers Comments

  • Robert Clive Hailstone says:

    Would be useful to know who the ‘third party’ was?

  • Simon Davies says:

    I agree, there is a gap as to what role the third party played and how Mr A contacted him to provide the certified ID


Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog


Jeff Zindani

The growth game – better to buy than build?

A law firm without a growth strategy is like any business that fails to plan for the future. It may continue to thrive in the short term but in the long term it is unlikely to succeed.


Preparing your staff for returning to the office

A recent story hit the headlines that CEOs were struggling to get their employees back into the office following the lifting of Covid-19 restrictions.


Litigation funding: Maturity and mergers

The general industry consensus is that multiple new entrants will continue to enter the litigation funding market, attracted by what they perceive as the potential gains and the lack of barriers to entry.


Loading animation