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Compliance Corner: Mishcon De Reya, Solicitors Regulation Authority
Editorial Staff
10 January 2022
The Solicitors Regulation Authority, which oversees lawyers in England and Wales, has imposed a £232,500 penalty on Mishcon de Reya, the London-based law firm, for failings over anti-money laundering procedures. Mishcon de Reya did not profit from the episode and divested itself from the fees earned once the breaches were identified, the SRA said. "The firm has amended its policies and procedures, including introducing and investing in new, more sophisticated IT systems which involve increasingly centralised record-keeping and are, in part, specifically designed to prevent future breaches of the type addressed by this agreement," the SRA said. A spokesperson for the law firm told WealthBriefing: "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."
Mishcon de Reya will also pay the £50,000 costs of a probe into the matter, the SRA said in a statement on 20 December, and reported more widely in the media late last week.
The regulator’s actions cover a period from September 2015 to April 2017, when the law firm worked for two individual clients , and unnamed corporate vehicles connected with the same two individual clients. Mishcon de Reya’s work related to a non-SRA regulatory investigation, asset planning for one of the individuals, and the initial stages of the proposed acquisition of two separate entities , the SRA said.
“While the firm believes that customer due diligence was obtained in relation to the two individual clients, the firm did not retain the hard copy file of such documents, which appear to have been misplaced, and no electronic copy of the records was retained either,” the SRA said. The watchdog said that some documents, but not a full set of them, were obtained about one of the corporate vehicles involved in one of the proposed acquisitions.
The SRA said that the proposed acquisitions presented a “higher risk of money laundering or terrorist financing” under the relevant money laundering legislation in force at the time, because they involved companies in high-risk jurisdictions. Such a position meant that “enhanced customer due diligence and ongoing monitoring was not adequately applied.”
Among other details, the SRA said that one payment was made into and three payments were made out of Mishcon de Reya’s client account between 22 July and 28 July 2016, which “did not relate to an underlying legal transaction in relation to which the firm was instructed." Funds belonging to one corporate vehicle were transferred to the client ledger for another corporate vehicle; they were used to discharge the firm’s fees and disbursements on the matter relating to the latter entity; and the firm did not send a bill of costs, or other written notification of the costs incurred, to the relevant entities before two invoices were raised and paid out of monies held in client account.
“Lawyers need to understand what they are being asked to do, by whom, and why. If that doesn't stack up, press the alarm by talking to a peer, the Money Laundering Reporting Officer and/or external advisors. The consequences of getting things wrong are increasingly grim,” Alex Ktorides, head of risk management and ethics, Ince, said in a note last Friday on the matter.
“Some of the breaches, such as holding client money without doing related legal work, are UK-centric rules set by the SRA. But at their heart they are all essentially about having adequate systems and controls in place to spot potential criminals, and to know what to do if suspicions are reasonably aroused,” Ktorides added.