SDT: Risk that client may use account for money laundering
A solicitor whose firm received over £530,000 into its client account from an unknown third party, “sat on it” because “we just didn’t know” what to do, a tribunal has heard.
Sufe Miah, sole director of Leeds firm The Miah Partnership, has been fined £20,000 by the Solicitors Disciplinary Tribunal (SDT) for allowing his client account to be used as a banking facility.
The tribunal noted that he accepted that this was “objectionable in itself”, and also raised “an obvious and significant risk that the account might be used unscrupulously by the client for money laundering”.
Mr Miah acted for 63 special purpose vehicles (SPVs) set up to buy and hold properties, which were apparently financed via crowdfunding, via ‘Company C’. The client in each case was the SPV, although Company C provided the instructions.
The solicitor had a previous business relationship with one of Company C’s directors, who was also a director of each SPV.
The instructions were limited to the conveyancing transaction; it was not involved with obtaining funds and did not have sight of the agreements between Company C and/or the SPVs and individual investors.
Approving an agreed statement of facts and proposed outcome between Mr Miah and the Solicitors Regulation Authority (SRA), the tribunal heard that the Miah Partnership received £536,682 into its client account from Company B in November 2015. Company B was not and has never been a client of the firm.
The firm, which had expected to receive the money from one of the SPVs (SPV35), applied the money to the ledgers for three of its transactions, describing it as “purchase monies”. Two and a half weeks later, it transferred the money to “what is assumed to be the sellers’ solicitors”.
M Miah told the SRA he asked the directors of SPV 35 about the transfer and “was advised that the sums received from Company B were for the transactions being carried out by SPV 35”. He did not press them any further.
The SRA said Mr Miah argued that “we were pressed for time” as an “apparent way of explaining having taken inadequate action”, but it pointed out the gap between receiving and transferring the money.
“In any event, whilst a lack of time might explain the respondent’s misconduct, it is not a defence to the allegation,” the regulator said.
The SRA said Mr Miah had no instructions on an underlying transaction between Company B and SPV35 – he did not even have any evidence there was one.
“The respondent simply accepted what he was told: that Company B was the investor into the scheme. The respondent does not appear to have even challenged why there was only one investor in three properties which were said to be financed by crowdfunding.”
Three days after the Company B money had been transferred away, the firm received the exact same sum of £536,682 into its client account from Company D – also never a client. There was no evidence that the firm provided Company D with the details of its client account.
The newly arrived money was applied to the ledger of SPV 30 in relation to two properties, even though their purchase price was just £150,000; a week later, the right money for those two properties was sent over by Company C.
Four days after that, Company C told Mr Miah that the original transfer had been a mistake and asked him to send the £536,682 on to Company B.
Mr Miah told the SRA that the law firm “sat on it and we sat on it longer than we should have done, but that was because we just didn’t know [what] to do”. Company C did not explain how it happened.
In non-agreed mitigation, Mr Miah said the SPVs were part of an investment group that was a trusted and longstanding client, which “ultimately distorted his judgement when the retainer in question started to exhibit unusual features”.
Mr Miah said he “did not plan or intend to provide banking facilities”, but he was simply “on the back foot” and under pressure from a sophisticated client whom he ought to have “stood up to” more robustly.
He said there was no “scheming or deliberate wrongdoing involved” and that, so far as he was aware, no client or third party has suffered any harm or loss as a result.
Noting that Mr Miah was the firm’s COLP and COFA, the SRA said his misconduct was “not planned and arose out of his client behaving unexpectedly”. He should have refused to act.
The misconduct was serious and repeated, involving “significant sums of money” totalling over £1m and exposing the firm to risks of money laundering and insolvency “although neither of those risks materialised”.
He was fined £20,000 and ordered to pay costs of £20,344.
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