Decision - Agreement
Outcome: Regulatory settlement agreement
Outcome date: 9 March 2020
Published date: 13 March 2020
Firm or organisation at date of publication and at time of matters giving rise to outcome
Name: Veale Wasbrough Vizards LLP
Address(es): Narrow Quay House, Narrow Quay, Bristol, BS1 4QA
Firm ID: 597329
This outcome was reached by SRA decision.
1. Agreed outcome
1.1 Mrs Sandra Ann Mitchell, also known as Sandy Mitchell, a non-member partner and solicitor of the firm Veale Wasbrough Vizards LLP, a recognised body authorised and regulated by the Solicitors Regulation Authority (SRA), agrees to the following outcome to the investigation of her conduct:
- she will pay a financial penalty in the sum £2,000, pursuant to Rule 3.1(b) of the SRA Regulatory and Disciplinary Procedure Rules
- to the publication of this agreement, pursuant to Rule 9.2 of the SRA Regulatory and Disciplinary Procedure Rules
- she will pay the costs of the investigation of £600, pursuant to Rule 10.1 and Schedule 1 of the SRA Regulatory and Disciplinary Procedure Rules.
2. Summary of Facts
2.1 Mrs Mitchell was instructed by a client in 2018, to act in a high value residential conveyancing transaction, for circa £3.2m, which completed in January 2019, where a significant proportion of the completion funds (net of a mortgage) of circa £1.6 million were being gifted by a relative of the client.
2.2 The client's relative lived in southeast Asia and no customer due diligence checks were carried out on that relative by Mrs Mitchell before the matter completed. She failed to:
- conduct checks on the source of the gifted funds, which (following retrospective checks made at the request of the SRA) came from a trust in another country in southeast Asia, and
- failed to verify who the ultimate beneficial owner of that trust was,
as required pursuant to Regulation 28 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs 2017).
2.3 No, or insufficient, questions were asked by Mrs Mitchell of the relative, or the client, about the gifted funds, when they should have been, as part of ongoing monitoring obligations pursuant to Regulation 28(12) of the MLRs 2017.
2.4 Mrs Mitchell also failed to follow the firm's established policies, controls and procedures during the conveyance by, for example;
- failing to complete adequately or at all the firm's internal money laundering form,
- failing to complete adequately or at all a property fraud questionnaire, and
- failing to complete appropriately the AML risk questions on the ‘Intapp' system, during the client onboarding process, which, if completed properly, would have returned a higher risk score requiring further investigations to be undertaken.
2.5 By failing to obtain documentary proof of the deposit funds, Mrs Mitchell also failed to follow the lenders' standing instructions regarding source of funds in breach of the UK Finance Mortgage Lenders' Handbook. There was also a failure to document the presence of the gift itself, in breach of the requirements of the mortgage offer.
2.6 The SRA acknowledges, in terms of mitigation, that the conveyance was completed on behalf of the client who is also a solicitor of England and Wales, and as such more reliance was placed on the probity of that client because of the client's status as a solicitor.
2.7 The client is a member (partner) of a leading international law firm, whose personal financial circumstances, based on earnings alone, would ordinarily indicate that the client could afford to purchase such a property with a mortgage, and consequently no immediate ‘red flags' were identified by Mrs Mitchell requiring further investigations.
2.8 Further, in terms of mitigation, retrospective customer due diligence has been performed at the request of the SRA, and there is no reason to suspect that any dubious transactions, which bear the hallmarks of money laundering, have taken place.
3.1 Mrs Mitchell admits, and the SRA accepts, that by failing to adequately perform customer due diligence, as required under the MLRs 2017, by failing to follow the firm's internal policies, controls and procedures appropriately, and by failing to follow a bank's instructions she has:
- failed to behave in a way that maintains the trust the public places in her and in the provision of legal services, in breach of Principle 6 of the SRA Principles 2011 (the Principles in force at the time of the misconduct),
- failed to comply with her legal and regulatory obligations, in breach of Principle 7 of the SRA Principles 2011,
- failed to carry out her role in the 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, and
- breached relevant anti-money laundering legislation and therefore failed to achieve Outcome 7.5 of the SRA Code of Conduct 2011.
4. Why the agreed outcome is appropriate
Financial Penalty of £2,000
4.1 The SRA considers, and Mrs Mitchell accepts, that a financial penalty of £2,000 is appropriate following reference to the SRA Enforcement Strategy because:
- there was a breach of statutory obligations, as the MLRs 2017 came into force on 26 June 2017 and as an experienced conveyancer Mrs Mitchell should have completed all of the necessary checks required, should have followed the firm's internal policies, controls and procedures, and satisfied the bank's requirements.
- the conduct was reckless and showed a disregard for statutory and regulatory obligations, had the potential to cause harm by facilitating a dubious transaction that could have led to money laundering and because Mrs Mitchell had direct responsibility for the conduct, which could have been avoided had she followed existing processes in place at her firm.
- 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 employees of a firm do not comply with anti-money laundering legislation and firm's internal policies, controls and procedures (as well as those requirements of banks).
- there has been no evidence of lasting harm to consumers or third parties, retrospective due diligence measures have confirmed that no money laundering has taken place and there is a low risk of repetition.
- Mrs Mitchell has assisted the SRA throughout the investigation, admitted breaches and has shown remorse for her actions too.
- And, as stated above, Mrs Mitchell concedes the status of the client, a high earning solicitor who must also adhere to increased moral standards and regulatory rules too, led her to believe the transaction, as a whole, was low risk.
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:
- Mrs Mitchell has co-operated with the investigation, the conduct was not intentional and does not form a pattern of misconduct, giving a ‘Nature Score' of 1. The breaches could have had a moderate impact, with respect to over £1m potentially being laundered and being converted into property, giving an ‘Impact Score' of 4.
- The associated ‘Conduct band' is B, owing to the total score of 5 (1+4) from sub-paragraph (a) above, giving a penalty bracket of £1,001 to £5,000.
- The misconduct is neither severe enough to be at the top of the bracket, nor trivial enough to be at the bottom of the bracket, and therefore a basic penalty at the mid-point of £3,000 has been determined by the SRA. A discount of 33% is applied to reflect mitigation for co-operation with the SRA's investigation, early concessions and factors outlined in 4.1(d),(e) and (f) above, leading to an overall financial penalty of £2,000 (which the SRA is empowered to direct, pursuant to s44D(2)(b) of the Solicitors Act 1974 (as amended)).
4.4 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.
4.5 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 Mrs Mitchell agrees that she 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).
5.3 Mrs Mitchell agrees to pay the costs of the SRA's investigation in the sum of £600. Such costs are due within 28 days of a statement of costs due being issued by the SRA.