Biggest penalty yet for English solicitors for money laundering compliance failures

News Desk

The Solicitors' Regulatory Authority, which regulates solicitors (attorneys) in England and Wales has imposed a record penalty* on a small firm of solicitors.

The firm, Ferguson Bricknell of Oxford reached an agreement with the Authority.

Until July last year, the maximum penalty for failure to design, implement and maintain effective money laundering controls was GBP2,000. In July, 2022 the maximum was increased to GBP25,000.

So the penalty is clearly designed to make the point that this was a serious case.

And it was.

The regulatory penalty is technically for breaches of the Regulatory and Disciplinary Rules, formerly known as The Solicitors' Code of Conduct. The Rules require law firms and other regulated organisations to comply with The Money Laundering Regulations, issued by national government.

First, although the allegations relate to The Money Laundering Regulations 2017, solicitors have been subject to such regulations since April 1994. Although attitudes of regulators and the Law Society as trade body have varied, the fundamental issues in national regulations have, in principle, changed very little.

The obligations for solicitors involved in transactional work - i.e. conveyancing (sale and purchase of property), probate, sales and purchases of shares, for example - were crystallised in the Money Laundering Regulations 2007 having been required by the Third Money Laundering Directive in 2005. That directive was repealed and replaced in 2015 by the Fourth Money Laundering Directive which led to the Money Laundering Regulations 2017.

It being clear that the obligations on solicitors' firms to put in place measures to detect and deter money laundering since at least 2007 and, for those firms that were properly advised, since 1994 the failures of the subject firm are rightly viewed by the Solicitors' Regulatory Authority as serious.

The failures were:

- the firm's business was 75% conveyancing, that area was left out of the firm's risk assessment system. Even more worrying is that Her (as was) Majesty's Treasury issued a statement of high risk areas for money laundering and terrorist financing and conveyancing was on that list.

In January 2020, the firm certified to the Solicitors' Regulatory Authority that its risk assessment complied with the 2017 Regulations.

- failure to ensure that one of the firm's partners undertook a course of training as required by the Regulations

- failure to have in place an independent audit function to review the systems and controls and their effectiveness

- an insufficiently robust transaction monitoring system which might seem like a makeweight point until.....

- failure to undertake source of funds enquiries where moneys arrived from someone who was not the client.

- perhaps most telling was that the firm's policies and procedures appeared to have not been updated since 2007 and took no account of the Money Laundering Regulations 2017 and the several Money Laundering Directives and legislative changes since 2005.

The Authority carried out an investigation into Ferguson Bricknell (the firm). The investigation included an onsite forensic investigation at the firm to review the firm’s overall money laundering compliance. Since then, the firm has put in place sufficient risk and compliance measures.

*Sloppy reporting in some media has incorrectly termed this financial penalty "a fine."

Further Reading:

Essentials: the financial crime risks of legal services providers including money laundering

For lawyers and those who deal with them.
Lawyers are both victims and perpetrators of money laundering, etc. schemes. Therefore they present risks to themselves and others.