Deposit: Solicitor failed to make checks
A law firm owner who fell victim to a conveyancing fraud and transferred £68,000 to a bank account without checking the details has been rebuked by the Solicitors Regulation Authority (SRA).
The fee-earner involved has been fined £3,000, but the firm also said its actions prevented a significant fraud from occuring.
Lubna Naz Khan, principal solicitor at Woodhall Solicitors in Bradford, admitted in a regulatory settlement agreement she made a mistake.
The agreement means she will not face a disciplinary tribunal.
It recorded that a fee-earner at the firm was undertaking a commercial property sale for a client, ‘Mr H’.
Mr H provided bank details of a third-party company, instead of an account in his own name. There was no evidence that the fee-earner made any enquiries into the identity of the third party.
The firm received the £68,000 deposit from the buyer’s solicitors and the fee-earner requested that Ms Khan, as authorised signatory of the firm’s client account, transfer the deposit to Mr H.
Ms Khan did so the same day, without reviewing the parties or account details on the matter.
“Soon after, it transpired that the Mr H who instructed the firm was a fraudster, impersonating the real Mr H.”
Ms Khan notified the relevant authorities and the transaction did not complete.
In mitigation, the solicitor said it was an isolated incident. “She accepts that she made a mistake, and this was an oversight on her part.”
The agreement continued: “Customer due diligence was conducted; however, the fraud was sophisticated. Ms Khan reviewed the matter, noticed concerns (albeit after the deposit funds had been sent), halted the transaction, and notified the relevant authorities.”
Ms Khan “subsequently assisted” in the recovery of the buyer’s losses from the firm’s bank, although it took over a year for the money to be refunded.
In deciding a rebuke was sufficient, the SRA said that while the breach was serious and caused harm to the buyer, “Ms Khan took remedial action and steps to rectify the breach” and there was a low risk of repetition, “particularly in light of the degree of insight and remorse shown by Ms Khan”.
It finished: “The agreed outcome is a proportionate outcome in the public interest because the issuing of such a sanction is necessary to maintain standards by highlighting the risks arising from the behaviour in question and deterring such repetition.”
A separate agreement identified Richard Graham Gouldsborough as the fee-earner. He offered similar mitigation to Ms Khan: it was an isolated incident, he made a mistake and it was a sophisticated fraud.
Further, he said, he suffered from Covid a week before the incident and “it is likely he was still recovering at the time”.
The SRA again found a low risk of repetition in light of his “insight and remorse”. It fined him £3,000 – higher than the usual £2,000 limit of the SRA’s powers because Woodhall is an alternative business structure. Under the Legal Services Act, employees of ABSs can be fined up to £50m.
In a statement, the firm said: “Woodhall Solicitors are pleased with the outcome as the fraud in question was detected at the material time.
“Our team was praised for their good practice in stopping a property transaction from completing and the full deposit was recovered.
“Woodhall Solicitors has proven their policies and procedures are robust and the above is an example that staff, including Lubna Khan, will go above and beyond to protect client money.”