AML: Firm showed disregard for obligations
A law firm with a “failing” anti-money laundering (AML) control environment, leading to multiple rule breaches, has been fined £2,000 by the Solicitors Regulation Authority (SRA).
But by reaching a regulatory settlement agreement with the SRA, Surrey law firm Buglear Bate & Co will not face the Solicitors Disciplinary Tribunal.
The SRA said it investigated the firm following a referral from its AML proactive supervision team. It found that, despite Buglear Bate having declared in 2020 that its firm-wide AML risk assessment was compliant with the requirements, in fact it was not.
“The risk assessment the firm had in place failed to consider the firm’s delivery channels and failed to have sufficient regard for the Legal Sector Affinity Group guidance, our sectoral risk assessment and warning notice.”
Further, the firm did not have in place compliant AML policies, controls and procedures because, among other elements, they did not cover identification and verification procedures, ongoing monitoring of clients and their matters, the identification of politically exposed persons and source of funds information.
The firm’s matter risk assessment form was also not compliant. “The form was intended to be filled in by the client, not the firm. The matter risk assessment is for the firm to complete, to identify and assess the risks posed by the client and matter.
“One purpose of assessing the risks of any matter is to determine whether enhanced customer due diligence is required. The form, as it stands, is of no assistance to the person making the assessment in deciding this.”
The SRA went on to find that these failures translated into shortcomings in transactions Buglear Bate handled.
In one, the firm failed to conduct adequate ongoing monitoring and scrutinise the transaction, including necessary source of funds checks, when £75,000 was received into its client account.
Documentation only described that the money as being £25,000 from ‘rentals’ and £50,000 from a ‘loan’. “There was no further information provided, eg whether the loan was personal or commercial, or any evidence for this,” the SRA said.
On another matter, there was a note on the file that it was ‘Below AML threshold’ and so the source of funds did not need to be scrutinised. The SRA said customer due diligence must be undertaken for all transactions in scope of the 2017 Money Laundering Regulations, outside of very limited exceptions.
Buglear Bate further failed to identify warning signs listed within the SRA’s warning notices on money laundering and terrorist financing, “specifically with respect to source of funds being unusual and unexplained payments from third parties and loans from non-institutional lenders”.
The firm admitted multiple breaches of principles and rules. The SRA said the conduct “showed a disregard for statutory and regulatory obligations and had the potential to cause harm, by facilitating transactions that could have led to money laundering (and/or terrorist financing)”.
The lack of compliance showed an “AML control environment failing” at the firm.
A fine of £2,000 was “a proportionate outcome in the public interest because it creates a credible deterrent to others and the issuing of such a sanction signifies the risk to the public, and the legal sector, that arises when solicitors do not comply with anti-money laundering legislation and their professional regulatory rules”.
In mitigation, the regulator acknowledged that there was no evidence of harm to consumers or third parties, the firm did not financially benefit from the misconduct, and it “has assisted us throughout the investigation, admitted the breaches and has shown remorse for its actions and remedied the breaches”.
