A former Law Society president's law firm has been fined for AML failures and for allowing $23m to pass through its client account.

The Solicitors Regulation Authority (SRA) was able to fine Scott-Moncrieff & Associates, a virtual law firm set up by Lucy Scott-Moncrieff, more than the standard £25,000 limit because it is an alternative business structure. It can fine those up to £250m.

• SRA = https://www.sra.org.uk/consumers/solicitor-check/596379/

An SRA notice published yesterday notes a law firm run by an ex-Law Society president has been fined £68,000 for:-

• Anti-money laundering failures.
• Allowing $23m to pass through its client account with no underlying legal work for a client located in the Russian Federation in relation to a purchase of an asset for $22.5m from a Canadian company. Between 17 March and 10 August 2021, the firm received three sums into its client bank account totalling $23,287,470.07 from its client.

AML FAIL

• An SRA inspection in 2022 found that none of its AML controls were compliant with the 2017 Money Laundering Regulations.
• Firm-wide risk assessment,
• Policies, controls, and procedures (PCPs),
• Matter risk assessments,
• Ongoing monitoring, and
• Customer due diligence

SRA

• THE SRA recommended that the firm – known as ScoMo – should immediately address the concerns and provide the firm with guidance to support it in doing so.
• Also referred it for formal investigation.

RUSSIAN CLIENT

• The SRA formal investigation began the following July and
• Identified that a consultant at the firm acted for a client located in the Russian Federation in relation to the purchase of an asset for $22.5m from a Canadian company.

ESCROW SERVICES

• ScoMo agreed to provide escrow services and general advice to the client, but did not act in the sale and purchase agreement for the asset.
• There was “no need for it to receive or make payments relating to that underlying transaction”, the regulator said.
• However, during 2021, it had received three sums into its client bank account from the client totalling $23.3m and made three payments totalling $22.5m to the company supplying the asset.
• between 17 March and 10 August 2021, the firm received three sums into its client bank account totalling $23,287,470.07 from its client.
• On the client’s instructions, the firm also paid $525,000 to the client’s agent, located in Germany, and $262,500 to another company located in Estonia.

SRA CONCLUSIONS

• This amounted to providing a banking facility, according to the SRA.
• A further investigation in 2023 found that the PCPs were still not compliant and did not incorporate the guidance provided the previous year.
• The SRA calculated the fine at 2% of ScoMo’s turnover.
• It described the misconduct as serious, given the importance of the Money Laundering Regulations, the risk that its client account “may have been used for money laundering, terrorist financing or other illegal or improper purposes”, and the length of time for which the firm was in breach of its regulatory obligations.
• Ms Scott-Moncrieff was president of the Law Society in 2012-13 and sits as a judge in both the Court of Protection and the Mental Health Tribunal. She is a former judicial appointments commissioner and House of Lords conduct commissioner.

Source

https://www.legalfutures.co.uk/latest-news/fine-for-law-firm-that-allowed-23m-go-through-client-account