SEATONS LAW LIMITED

Decision - Agreement

Outcome: Regulatory settlement agreement

Outcome date: 20 November 2020

Published date: 24 November 2020

Firm details

Firm or organisation at date of publication and at time of matters giving rise to outcome

Name: Seatons Law Limited

Address(es): 1 Alexandra Road, Corby, Northamptonshire, NN17 1PE

Firm ID: 592206

Outcome details

This outcome was reached by agreement.

Decision details

1. Agreed outcome

1.1 Seatons Law Limited (the firm), a licensed body authorised and regulated by the Solicitors Regulation Authority (SRA), agrees to the following outcome to the investigation of its conduct:

1. the firm will pay a financial penalty in the sum £14,000, pursuant to Rule 3.1(b) of the SRA Regulatory and Disciplinary Procedure Rules.
2. to the publication of this agreement, pursuant to Rule 9.2 of the SRA Regulatory and Disciplinary Procedure Rules.
3. the firm will pay the costs of the investigation of £3,500, pursuant to Rule 10.1 and Schedule 1 of the SRA Regulatory and Disciplinary Procedure Rules.

Reasons/basis

2. Summary of Facts

2.1 The firm acted for clients in various conveyancing matters in 2018.

Property A

2.2 In respect of Property A, the firm was instructed to act on behalf of the seller under a Power of Attorney on or around 23 July 2018. The attorney provided the firm with instructions throughout this matter.

2.3 Certified bills in the name of the attorney were obtained. A certified passport and driving licence for the attorney were obtained too.

2.4 Certified bills in the names of the donor were obtained. There was, however, no photographic identification (to include photograph and date of birth), such as a passport or driving licence, obtained for the donor in respect of this particular matter at the relevant time; though the SRA accepts photographic ID was obtained in the form of the donor’s driving licence at a later date, in relation to the transaction involving Property C referred to below.

2.5 The firm did not meet the donor or attorney in person, which increased the risk associated with the transaction and should have been mitigated accordingly.

2.6 The solicitors on the other side of the transaction asked if the firm held identification for both the donor and attorney and if the firm had instructions to act for both parties.

2.7 The firm responded the following day confirming that it held identification for the donor seller and attorney and that it acted for both.

2.8 Completion took place on 23 November 2018, with £45,480.90 being paid into a bank account in the name of the attorney, following payment of all of the outstanding mortgage and costs.

2.9 Requisitions were raised by Her Majesty’s Land Registry (HMLR) on 11 January 2019 and it confirmed that it was unable to complete the registration pending the receipt of additional information, including completed ID1 forms in respect of the donor and attorney.

2.10 HMLR has refused to register the transfer and as at the summer of 2020, the title of Property A is still registered to the donor, and not the actual purchasers from completion on 23 November 2018, although the firm has with the assistance of its professional indemnity insurers taken steps to rectify the position, which it anticipates will be possible.

Property B

2.11 In respect of Property B, the firm was instructed in July 2018 to transfer a property into the attorney’s name, as a gift for no consideration. The same Power of Attorney was used, as in Property A.

2.12 The initial instructions for the transfer came from a third party, who stated that they were providing instructions on behalf of the attorney.

2.13 There was no evidence on the file that the attorney provided the third party with authority to provide instructions on her behalf.

2.14 There were also no identification documents on the file for the donor or the attorney, though some documentation had (as identified in 2.3 and 2.4 above) previously been obtained on the Property A transaction.

2.15 None of the parties involved in the transaction were met in person.

2.16 It is not clear from the file why the third party provided instructions.

2.17 The application to change the register was completed and submitted to HMLR on 18 August 2018. Shortly after, on 21 August 2018, HMLR wrote to the firm raising requisitions, noting that the transfer was not for value, was in favour of the attorney and asking it to clarify how and why the attorney was able to benefit and to also lodge evidence that the donor had ratified the transaction.

2.18 A telephone attendance note confirms that the attorney called the firm on 22 August 2018 to address these requisitions. The attorney was told that the donor would have to call the firm himself to confirm his satisfaction with the transfer.

2.19 The note confirms that the donor, or someone purporting to be the donor, called the firm a few days later and stated that he did ratify the transfer to the attorney. The firm asked for this to be confirmed in writing.

2.20 The firm responded to HMLR on 3 September 2018, confirming that the attorney was the wife of the donor and that the donor was voluntarily transferring his interest to the attorney. The firm also stated that it had spoken to the donor to verify the transaction prior to completion.

2.21 An email received on 23 September 2018 from the donor, or someone purporting to be the donor, confirmed that he gave consent to register the property in the name of the attorney.

2.22 Registration at HMLR completed on 24 September 2018.

2.23 HMLR again contacted the firm on 1 March 2019 raising various queries, including, among other things, questions regarding the customer due diligence (CDD) that had been requested at the time.

2.24 Further correspondence was received from HMLR on 19 March 2019 informing the firm that it had received an objection to the registration from the donor.

2.25 In relation to the transfer of this property, a note sets out the circumstances in which the firm were instructed to act, how the matter proceeded and the fact that HMLR contacted the firm requesting further information on 1 March 2019.

2.26 Even though the freehold title is now registered in the name of the attorney, applications are pending with HMLR in relation to this title.

Property C

2.27 In respect of Property C, the firm was instructed to act on behalf of the buyer, seller and lender on this matter, on or around 1 October 2018.

2.28 The same donor and attorney were involved as the seller, as in Properties A and B.

2.29 The consideration for the property was £330,000.

2.30 One fee earner acted for the seller and one fee earner acted for the buyer.

2.31 The lender provided a mortgage of £231,111 to purchase the property. The balance was to be paid from the buyer’s own funds.

2.32 Initial details of the new instruction, as well as much of the instructions throughout the matter on behalf of the buyer, came from the same third party as in Property B.

2.33 There was no evidence on file that the buyer provided the third party with authority to provide instructions on his behalf.

2.34 Certified copies of the donor and attorney’s driving licences were obtained by the firm, along with certified copies of bills in the names of those individuals.

2.35 A copy of the buyer’s passport was on the client file, along with various bills in his name.

2.36 None of the parties involved in the transaction were met in person.

2.37 Completion took place on 19 December 2018.

2.38 An email from the fee earner to a director at the firm, dated 25 February 2019, confirms that the firm had decided not to involve its insurers until it had “some feedback on the matrimonial front”.

2.39 This confirms that the firm was aware at this point that issues had arisen.

2.40 A further email on 27 February 2019 confirms that the attorney had contacted the firm by telephone, and that she had now completed an ID1 form and had sent it back to the firm.

2.41 An email was then received by the firm on 7 March 2019 from individuals purporting to be acting on behalf of the donor.

2.42 The email, written in relation to Properties B and C, stated that the donor had been imprisoned abroad since January 2018 and that the Power-of-Attorney was fabricated.

2.43 Property C remains in the name of the donor and the registration of new charges has been rejected by HMLR. Applications are currently pending against the title to this property.

Compliance with the Money Laundering Regulations

2.44 The firm failed to allocate the correct risk rating to the above three matters.

2.45 All matters were incorrectly rated as being low risk by the fee earners.

2.46 This is important because the initial risk rating on a client matter will determine the level of CDD that is required.

2.47 Conveyancing in itself is in the highest risk category of being used for money laundering, according to the Government’s 2017 National Risk Assessment.

2.48 Indeed, the firm’s practice-wide risk assessment, as required under Regulation 18 of the Regulations, identifies conveyancing as being in the high- risk category. It is therefore unclear why the matters were categorised as low risk.

2.49 The firm acted in all three matters under a Power of Attorney, had never met either the donor or the attorney in person and had not appropriately verified their identities.

2.50 Additional information should have been sought to verify their identities, given that nobody at the firm met them in person.

2.51 Their ID documents had been certified by a member of a place of worship.

2.52 However, the verified documents did not confirm that the certifier had met the donor or the attorney when doing so to verify their identities.

2.53 The firm’s practice-wide risk assessment also confirms that the person certifying documents must be known to the firm and that the transaction should not proceed until sufficient identification is on file.

2.54 The firm has confirmed that the certifier was not known to the firm.

2.55 The firm further did not verify that the third party was authorised to act in the transactions, nor did it verify her identity.

2.56 The firm did not carry out adequate ongoing monitoring of the buyer in the Property C transaction and there is no audit trail to show the source of the funds that were used to pay the deposit.

2.57 The deposit funds came from a bank account in his name, but this was insufficient as the firm were unable to confirm where those funds originated from and insufficient checks were made to understand the provenance of those funds.

2.58 The purpose of doing source of funds checks is to ensure that the funds used transactions come from a legitimate source and are not the proceeds of crime.

2.59 The firm also failed to carry out Enhanced Customer Due Diligence (EDD) on all three matters, which presented a higher risk of money laundering.

2.60 The firm also failed in these three matters to act upon ‘red flag indicators’ including, cumulatively, the firm being based in Northampton with clients based in Luton, various instructions coming via an unrelated third party where it was not clear what involvement she had, a property was transferred for nil consideration in unusual circumstances, and the matters proceed under a Power of Attorney when neither the donor or attorney were met in person.

2.61 The firm accepts it failed to have in place, at that time, an adequate anti-money laundering policy.

3. Admissions

3.1 The firm admits, and the SRA accepts, that by failing to:

1. perform adequate customer due diligence at the material times,
2. perform ongoing monitoring,
3. perform enhanced customer due diligence, and
4. have in place an adequate anti-money laundering policy, as required under the relevant money laundering regulations,

it has:

3.2 Failed to comply with its legal and regulatory obligations, in breach of Principle 7 of the SRA Principles 2011.

3.3 Failed to run its business effectively and in accordance with proper governance and sound financial and risk management principles, in breach of Principle 8 of the SRA Principles 2011.

3.4 Failed to have effective systems and controls in place to achieve and comply with all the Principles, rules and outcomes and other requirements of the Handbook, where applicable, and therefore failed to achieve Outcome 7.2 of the SRA Code of Conduct 2011.

3.5 Failed to identify, monitor and manage risks to comply with all the Principles, rules and outcomes and other requirements of the Handbook, if applicable to you, and take steps to address issues identified, and therefore failed to achieve Outcome 7.3 of the SRA Code of Conduct 2011.

3.6 Breached relevant anti-money laundering legislation and therefore failed to achieve Outcome 7.5 of the SRA Code of Conduct 2011.

3.7 Breached Regulations 28(2), 28(10), 28(11) and 28(16) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs 2017), in relation to customer due diligence measures.

3.8 Breached Regulation 33(1)(g) of the MLRs 2017, in relation to its obligation to apply enhanced customer due diligence.

3.9 Breached Regulation 19 of the MLRs 2017, by failing at that time to have an adequate anti-money laundering policy.

4. Why the agreed outcome is appropriate

Financial Penalty of £14,000

4.1 The SRA considers, and the firm accepts, that a financial penalty of £14,000 is appropriate following reference to the SRA Enforcement Strategy because:

1. there was a breach of statutory obligations with respect to the money laundering regulations and the firm should have complied with the same.
2. the conduct had the potential to cause harm by unintentionally facilitating fraudulent transactions that gave rise to a risk of money laundering and because the firm was responsible for the overall conduct.
3. the agreed outcome is 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 a firm does not comply with anti-money laundering legislation.
4. there is now a low risk of repetition.
5. the firm has assisted the SRA throughout the investigation, admitted breaches, made changes to policies and procedures as a result, ensured training to all relevant employees is regularly provided and the two fee earners involved in the transactions are also no longer at the firm.

4.2 Rule 4.1 of the SRA Regulatory and Disciplinary Procedure Rules states that a financial penalty may be appropriate to maintain professional standards and uphold public confidence in the solicitors’ profession and in legal services provided by authorised persons. There is nothing within this Agreement which conflicts with what is stated in Rule 4.1 and on that basis a financial penalty is appropriate.

4.3 In deciding the level of the financial penalty, reference is made to The SRA’s Approach to Setting an Appropriate Financial Penalty (issued 13 August 2013 and updated on 25 November 2019). Following the three-step fining process, the SRA has determined the following:

4.4 The firm is a firm of greater means, as it has an annual domestic turnover of more than £2m, and as such the financial penalty is calculated as a percentage of turnover.

4.5 Step 1(a) – assessing the seriousness of the misconduct:

Nature of conduct score: High = nature score of 3.

Harm or risk of harm: Medium = impact score of 4.

Step 1(b) – arriving at a broad penalty bracket (percentage of turnover, as over £2m):

Conduct band “C”, as nature and impact scores total 7 (3 + 4), indicating a basic penalty of between 0.6% and 1.3% of annual domestic turnover.

The turnover relied upon for the calculation is £2,595,723, being the turnover declared during the relevant period.

The SRA and the firm agree the basic penalty scale of 0.9% of turnover to be appropriate, when considering the aggravating and mitigating factors in this matter.

As such, the basic financial penalty is 0.9% of £2,595,723 turnover, equating to £23,361.50.

The SRA and the firm agree the basic penalty be reduced by the maximum allowable 40% discount, to reflect the mitigating factors, such as assisting the SRA with its investigation, early admissions, corrections and commitment to providing the highest standard of service to reduce the risk of repetition of similar issue.

Consequently, the basic penalty of £23,361.50 is reduced by the discount of 40%, arriving at £14,000 which the SRA agrees is appropriate and the firm agrees to pay.

Publication

4.6 Rule 9.2 of the SRA Regulatory and Disciplinary Procedure Rules states that any decision under Rule 3.1 or 3.2, including a Financial Penalty, shall be published unless the particular circumstances outweigh the public interest in publication.

4.7 The SRA considers it appropriate that this agreement is published, as there are no circumstances that outweigh the public interest in publication and in the interests of transparency in the regulatory and disciplinary process to do so.

5. Acting in a way which is inconsistent with this Agreement

5.1 The firm agrees that it will not act in any way which is inconsistent with this agreement, such as by denying responsibility for the conduct referred to above. That may result in a further disciplinary sanction. Acting in a way which is inconsistent with this agreement may also constitute a separate breach of Principles 1, 2 and 5 of the SRA Principles contained within the SRA Standards and Regulations 2019 (such SRA Principles having been in force since 25 November 2019).

6. Costs

6.1 The firm agrees to pay the costs of the SRA's investigation in the sum of £3,500. Such costs are due within 28 days of a statement of costs due being issued by the SRA.