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Gideon Habel

Partner, Leigh Day

AML: standing together

AML: standing together


Gideon Habel welcomes the regulator's increased focus on an insidious area of criminal activity 

It has been noticeable in recent months that the Solicitors Disciplinary Tribunal (SDT) has dealt with a rash of cases dealing with anti-money laundering (AML) offences.

These have variously been associated with what are euphemistically described as ‘dubious investment schemes’, but also with traditional property and other commercial transactions.

Acronym overload

Managers, financial and accounts staff in most firms will be aware of the Solicitors Regulation Authority’s (SRA) keen interest in the area, not least in light of the advent of the 5th Anti-Money Laundering Directive (AML5).
The SRA’s focus has been piqued, too, by the National Crime Agency’s (NCA) intervention earlier this year.

The NCA was critical of the low number of suspicious activity reports (SARs) it received from solicitors and firms.

Its critique was all the more excoriating in impact given solicitors’ day to day involvement in many of the types of transactions the NCA has in its sights.

All of this has resulted in the SRA including an “increase in monitoring of anti-money laundering arrangements” in its business plan 2020-2021 consultation, which closed in August 2020.

A closer look at the cases provides an interesting sense of the spectrum of cases crossing the desk of the SRA’s AML investigations team in the past couple of years.

They range from the slightly mad, through to the sad and the truly bad, but hold lessons for us all.

From Russia with love

The first is the case of NL, a former partner at a London firm with a significant client base in Russia and Ukraine.

The SRA opened her files and alighted on transactions in which such clients bought properties from Dubai, the British Virgin Islands, St Kitts and Nevis and Cyprus.
NL accepted that the firm did not have an appropriate AML policy in place; there was no firm-wide risk assessment; she did not apply enhanced due diligence in appropriate cases; and that she failed to conduct ongoing monitoring.
An aspect of her defence to the allegations relating to the lack of a firm-wide risk assessment was that the firm “knew 99 per cent of their clients who were family or friends”.

The facts as set out in the agreed outcome do not specify who those friends are, nor their bona fides, but it appears somewhat foolhardy to have sought to rely on this particular justification in the geographical context.
NL was suspended for nine months and can return to practice in March 2021.

A tragic tale

Perhaps the saddest of the cases was that of SDK, a sole practitioner at SDK Law.

In a statement of agreed facts, he accepted that the transactions the SRA was looking at “exhibited many of the red flags in relation to money laundering”.
The agreed outcome, approved by the SDT, set out that “[SDK’s] understanding of the role of the parties involved in the transactions was unclear, and the nature of the transactions being conducted was outside his expertise, involved foreign lawyers and companies based on other jurisdictions and contained multiple documents with confusing and 
meaningless terminology”.
What is more, some of the transactions in question involved a company based in Sinaloa, Mexico.

As anyone who has had the time to catch up with Netflix during lockdown will know, it is not historically an area of high commercial repute.
SDK admitted that he did not understand the contents of some of the documents he was working on; and accepted that he had not been familiar with all the applicable rules governing his practice.
Taking the case at face value, as we must, given the admissions, it is a tragic tale of a well-meaning sole practicing solicitor finding himself caught up in something he really did not understand and without the means or the knowledge to extricate himself from the situation safely.

SDK admitted lack of integrity, recklessness and manifest incompetence and was suspended for 15 months. He can return to practice in October 2021.

Bag men

At the other end of the spectrum are the cases of SMO – a former partner of his firm convicted of three offences under AML regulations in 2018 – who was struck off by agreement; and of RIM, a solicitor similarly convicted of three AML offences and jailed for seven years in 2019 (and also struck off by agreement).

It was reported that Manchester Crown Court heard RIM was the “gangsters’ ‘go-to’ solicitor, who would carry out property transactions without asking questions about where the money had come from”.

There will always be the genuine rogues.

Together, stronger

Although these cases before the SDT pre-date the coming into force of AML5 by some time, the SRA’s increased focus on this creeping, and particularly insidious, area of criminal activity is to be welcomed.

It cannot, however, be expected to be everywhere at once and nor would we want it to be.

Rather, what is required is for the legal community to take up the challenge, individually and as a collective.

We have all heard the stories of the well-meaning, high flying solicitor who allows commercial interests to cloud their thinking when a heavyweight client asks something unusual.

But the thin end of the wedge often presents itself in a far more subtle fashion and it is up to us as a profession to see it for what it is – and act accordingly.

It is for individual solicitors working on transactions or with ‘unusual’ clients to recognise the ‘tells’ and then to have the courage to call out what they see.

It is for firms to ensure that they have the internal know how to develop and oversee the sorts of robust AML processes, training and open reporting chains that will enable their businesses and experts to do their jobs safely.

And it is for us all in the profession to ensure that we are all policing ourselves – and each other – in making sure we are all proceeding with appropriate care and, where appropriate, courage.

The profession is at its best when it responds as one to such instructions, leaving the client with nowhere to go.

We must use the weapons available to us in this battle.

The legal profession relies on this for it to retain its collective integrity.

Gideon Habel is a partner and head of Leigh Day’s regulatory and disciplinary team