Money laundering:
Evidence tenuous, tribunal rules
The Solicitors Disciplinary Tribunal (SDT) has thrown out the prosecution of two solicitors for breaching the money laundering regulations (MLRs) rules after finding that they had no case to answer.
In a rare move, the tribunal acceded to the defendants’ application after the Solicitors Regulation Authority (SRA) had made its case, but said this may not have been the case had the latest MLRs been in force at the time.
Jeffrey Crewe was a solicitor at alternative business structure Metamorph Law and Christopher Cann its money laundering reporting officer and compliance officer for legal practice.
Mr Crewe, who qualified in 1967, was accused of failing to undertake adequate source of funds checks in relation to transactions carried out for five clients.
He also faced several charges over his work on a £1.5m cash purchase of a flat for ‘Client K’ in 2016: again failing to check source of funds, and also not completing enhanced due diligence on an overseas client he had not met, failing to terminate the relationship with Client K after he refused to authorise contact with his bank, and relied on a bank’s purported due diligence checks when it was not appropriate to do so.
Mr Cann, who qualified in 1982, was charged with authorising Mr Crewe to proceed with the transaction despite this and not ensuring the firm adhered to the MLRs.
In relation to the five clients, Mr Crewe accepted that there was no evidence on the files of source of funds checks, but pointed to regulation 8(2) of the 2007 MLRs, which required “ongoing monitoring” of business relationships.
Mr Crewe knew each of the clients and had acted for them for some years. The SDT accepted that there was nothing that should have alerted him to carry out a source of funds check.
He subsequently provided evidence to support this, and although the SDT said he could be criticised for not recording his decisions on the files, the SRA had not charged him with failing to keep proper records.
The tribunal ruled that, on the “strict wording of the allegation and the requirements in force at the time”, there was no case to answer – there was “some evidence but it was of a tenuous nature”.
In relation to Client K, the SDT found the evidence that various red flags were engaged was “weak” – for example, it was not unreasonable for Client K, a Syrian living in Lebanon after a long time in Canada, to use an intermediary, whom Mr Crewe had known for a long time.
Further, while one of the banks that had provided material to Mr Crewe for the purposes of the MLRs was in Syria, the other was UK-registered.
In any case, the tribunal found that Mr Crewe had in fact carried out sufficient enhanced due diligence checks – such as various bank documents, a passport and a utility bill – even though an email from Mr Cann showed he was uncomfortable with Mr Crewe’s approach to AML in this case.
The SRA had also conceded that there was no enough evidence to make a suspicious activity report.
However, the SDT emphasised that the 2007 MLRS were narrower than later versions. “In arriving at its decision… the tribunal wished to make clear that this was on the particular facts of the case and in the particular context of the MLRs 2007.
“It did not commend [Mr Crewe’s] approach and very much doubted that it would have been adequate in the current much more demanding climate. The tribunal did not underestimate the vital importance of complying with the MLRs.”
The tribunal similarly cleared Mr Cann, saying that, even taken at its highest, the evidence did not prove the case against him beyond reasonable doubt.
The parties agreed to bear their own costs.