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.