“Manifestly incompetent” solicitor missed red flags on dubious deals

SDT: Solicitors admitted misconduct

An experienced solicitor who failed to react to a series of red flags on two dubious property sales has admitted to being manifestly incompetent.

The Solicitors Disciplinary Tribunal (SDT) fined Aamer Masood £7,501, and the firm’s owner, Ali Newaz – who allowed money to sit in client account for too long and authorised payments to third parties – £5,000.

Mr Newaz, who qualified in 2007, is the owner of Ilford, Essex firm Woodford Wise and holds all the compliance roles. Mr Masood, admitted in 2005, had conduct of the two transactions. Mr Newaz supervised him and all the firm’s other fee-earners.

In an agreed outcome, approved by the SDT, the Solicitors Regulation Authority (SRA) accepted that Mr Masood “attempted to apply customer due diligence measures” in the first transaction, such as meeting his clients in person and obtaining identification document.

“However, the evidence shows that he did not adequately scrutinise or verify the information that he had been provided with.”

He missed several red flags during the transaction: the property’s price increased from £25,000 to £625,000 in just two years without an adequate explanation; the proceeds of sale were retained in client account for three months, were distributed piecemeal to third parties; the client gave three different spellings of his own name in two emails; and £76,000 of the deposit was “moved around in a circle with no obvious legitimate explanation”.

The SRA said Mr Masood ought to have made further enquiries about the increase in price and the identity of the bank account to which the vendor client requested payments be made.

The problems with the second property came after completion. Again, the proceeds were retained and distributed in piecemeal fashion over months and one of the two clients, ‘Mr B’, spelled his name differently in different contexts.

HM Land Registry requisitions highlighted that Mr B had provided documents with two very different dates of birth and two different mobile numbers, while he and ‘Ms C’ had changed their signatures significantly.

“The explanation given by both of them was that they had consciously changed their signatures just prior to obtaining new passports, which is itself inherently unlikely and therefore an inadequate explanation, without more, of the change in signatures.

“Mr B’s ‘new’ signature was extremely simplified – it essentially just reads ‘aLi’ in block script – and bore no resemblance to the old, more conventional, signature. It seems inherently unlikely that a person would alter their signature to such an easily forgeable form.”

This ought to have prompted Mr Masood to carry out “further and better checks” of the clients’ identities. The Land Registry ultimately cancelled the registration because of its concerns.

By failing to return the sale proceeds promptly, as soon as there was no longer any proper reason to retain the funds, the firm provided banking facilities, the SRA said.

The reason the client in the first transaction provided was that he intended to purchase a commercial property with the proceeds.

The SRA said: “However, that was a separate matter and was not itself a reason to retain the funds. The purported onward purchase of a commercial property was not a part of a chain.

“In any event, once funds were being drawn down in piecemeal fashion, it should have become obvious that the funds were not being used in the manner suggested.” No reason was provided in respect of the second transaction.

Shortly before the first transaction completed, the client changed his instructions and asked for the proceeds to be paid to ‘Company A’, which he said was his business.

Its name sounded like an Indian restaurant, the SRA said, whereas the client had said that he worked in construction.

Had Mr Masood conducted due diligence, he would have discovered that Company A was actually owned by the purported purchaser.

“The inference to be reasonably drawn from this is that the purported purchaser and purported seller conspired to defraud the lender of the loan payment [of £433,200].”

The SRA said Mr Masood was “at best credulous and at worst reckless. The public would be alarmed by a solicitor who failed to discharge his responsibilities in this way…

“To the extent that Mr Masood was not aware of the risk of undertaking a property transaction with inadequate due diligence, or that the due diligence he had undertaken was inadequate, then he was manifestly incompetent.”

Mr Masood apologised for his “incompetent conduct”. He said the transactions did “not reflect the standards he aspired and continues to aspire to achieve and unfortunately did highlight a lacuna in his understanding and approach to AML and the rule prohibiting the provision of a banking facility”.

He suggested he had also been “less alert” as he had had “previous unremarkable dealings” with the clients.

The SRA said Mr Newaz “bore ultimate responsibility for compliance by the firm”, but failed to ask about the questions raised by the red flags.

The regulator accepted that Mr Newaz had no direct knowledge of the transactions and that it was open to him to place “a significant degree of reliance upon Mr Masood given the seniority and experience of the latter”.

Both solicitors were “the victims of wrongdoing by third parties” and had engaged fully with the regulator, while Mr Newaz immediately sought to remedy the systemic issues thrown up.

Mr Masood also agreed to pay costs of £12,500 and Mr Newaz £9,700.

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