Top firm’s COLP “acted reasonably” over concerns about client


Coates: No reason to review file

The compliance officer for legal practice (COLP) at leading City law firm Kennedys has been cleared of failing to adequately investigate concerns about a property development it was advising on.

The Solicitors Disciplinary Tribunal (SDT) decided that Andrew Coates, Kennedys’ chief risk officer, was justified in relying on assurances provided by a senior property partner.

He was charged alongside that now former partner, Dennis Ko, who was separately fined £27,500 for failing to undertake proper anti-money laundering (AML) checks on the client, Sanjiv Varma, back in 2017.

Mr Varma attempted to buy the Grosvenor Hotel in Bristol with the intention of converting it into student flats as a buyer-funded development, but the purchase never completed.

Instead, the High Court subsequently ordered him and his company to pay a total of over £9.3m to liquidators, to “reflect significant sums misappropriated from investors”.

The court found that there had been an “undoubted substantial fraud” in relation to Mr Varma’s property company. Mr Varma was convicted of criminal contempt and jailed for 21 months as part of the litigation but remains at large.

The SDT heard that, in July 2017, a solicitor, Mr Dean, working with Mr Ko had raised concerns with Kennedys’ risk and compliance department about the development. They arose from a warning notice on investment schemes that had been issued by the Solicitors Regulation Authority (SRA) a month earlier.

Mr Coates attended a meeting on 1 August with Mr Ko, head of real estate, and another partner who was aware of Mr Dean’s concerns.

At this, Mr Ko explained the development and confirmed that he had worked with the client recently. Mr Coates told the tribunal that this provided him with reassurance as to the client’s bona fides, given that his primary concern, in light of the warning notice, was that the development was fraudulent.

The SRA alleged that the meeting made Mr Coates aware of seven red flags about the development. However, the SDT found that, whilst he was made aware of one – that the deposits being paid were high – there was no evidence he knew about the others.

It did not accept that Mr Coates was aware of “serious concerns” as a result of the meeting.

It continued: “Indeed, he had been assured by Mr Ko that things were on track. Mr Coates… had concluded that there was no evidence of fraud, and that whilst the project might not have been well managed, there was no evidence that the client was misappropriating deposit monies.

“He had advised that Mr Ko conduct a site visit to ensure to check on the progress of the project.

“Given that it was not clear to Mr Coates that there were serious concerns, the tribunal found that the actions taken by Mr Coates were reasonable and were in compliance with his obligations as the firm’s COLP.”

It was also not unreasonable, in the circumstances, for Mr Coates not to review the file at that stage – he was “entitled to rely on the information given to him by Mr Ko without making further enquiries”.

Three weeks later, Mr Dean reported that a surveyor had visited the site and that it was with the insurers to issue a policy. Thereafter, they would be able to access the site.

This led Mr Coates “to believe that work was underway and the major issue arising out of the 1 August 2017 meeting (namely whether the work was being conducted) was resolved.

“Accordingly, the tribunal found that at that point, Mr Coates had no reason to be concerned such that he was required to take any further action than that which he had already taken”.

The SRA made no criticism of Mr Coates’ conduct thereafter. Mr Ko left Kennedys in September 2017 and Kennedys told Mr Varma it would no longer act for him in February 2018.

The SDT dismissed the charges against Mr Coates. There were no applications for costs.




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