Mishcon de Reya, one of the UK’s highest-profile law firms and conveyancers for the prime housing market, has been fined £232,500 over ‘numerous’ anti-money-laundering (AML) failings including due diligence lapses in three property transactions.
The agreed penalty has been levied by the Solicitors Regulation Authority (SRA) and is one of the largest of its kind ever levied on a legal firm.
Mishcon de Reya’s final bill could have been much larger – the SRA said the penalty should have been 0.25% of its annual turnover of £155 million or £387,500, but the company received a 40% discount in respect of ‘mitigating factors’.
Such discounts are usually given when firms cooperate with investigations and ‘come clean’ at an early stage.
The first AML lapses took place between 2015 and 2015 and involved two clients seeking to acquire corporate entities that presented a higher risk of money laundering or terrorist financing.
During the investigation, it was discovered that the law firm had enabled payments in and out of the client account that did not relate an underlying legal transaction and the firm did not send a bill of costs or other written notification of the costs incurred.
The other lapses, during 2017 and 2018, concerned three property transactions during which due diligence was not fully carried out and copies of the checks that were made were not retained.
A spokesperson for the company says: “We are pleased to have come to a settlement with the SRA relating to two separate and historic investigations in relation to which we have made appropriate admissions. Mitigating factors such as our cooperation with the SRA throughout the investigations and the corrective action we have taken since to prevent a recurrence have been recognised by the SRA in reaching this outcome.”
Martin Cheek (pictured), MD of SmartSearch says: “To have a high-profile law firm like Mishcon de Reya receiving one of the largest fines the SRA has issued should act as a wake-up call for the legal sector.
“The firm accepted that inadequate training was provided to the partner responsible for AML compliance, and this clearly demonstrates the regulator will not accept ignorance as a defence.
“The fine also related to a lack of evidence of due diligence being carried out. The firm may have conducted the required checks, but wasn’t able to produce evidence that they had done so.
“This highlights the difficulties firms face when conducting the requisite AML compliance manually, and to avoid fines, firms should look to switch to an electronic verification system.
“An electronic verification platform will keep the requisite information on file, in a GDPR compliant manner, and this will ensure law firms can prove that they have carried out checks. It will also continually monitor the client in case they are added to a sanctions or politically exposed person list in the future.
“This case highlights that even a top law firm can fall foul of AML compliance rules if they are not putting in place the correct procedures. The best way to implement these is by partnering with a provider that can ensure compliance, and allow the firm to focus upon its professional services to clients.”
Read the full adjudication.