Tribunal upholds £68,000 penalty over AML failures and misuse of client account
A law firm has failed in its attempt to overturn a substantial regulatory penalty after a tribunal upheld findings of anti-money laundering (AML) failures and misuse of client account facilities.
The Solicitors Disciplinary Tribunal dismissed an appeal brought by Scott-Moncrieff and Associates Limited against a £68,000 fine imposed by the Solicitors Regulation Authority.
The penalty followed findings that the firm failed to maintain adequate safeguards against money laundering risks over several years and allowed its client account to be used as a banking facility.
The tribunal heard that between 2017 and 2021, the firm did not have a compliant firm-wide risk assessment in place, as required under the Money Laundering Regulations. It also failed to establish appropriate policies and controls to mitigate those risks.
In addition, the firm permitted transactions through its client account that were not linked to the delivery of legal services. This included handling millions of dollars in payments connected to an international transaction, which raised concerns about potential misuse of the account.
The firm challenged both the findings and the level of the penalty, arguing that its business model and the limited proportion of AML-relevant work should have been treated as exceptional circumstances warranting a lower fine.
It also argued that the regulator had taken irrelevant factors into account and failed to properly recognise mitigating steps taken after the breaches were identified.
However, the tribunal rejected all grounds of appeal, concluding that the original decision-maker had correctly applied the regulatory framework and exercised discretion within reasonable bounds.
The tribunal found that the seriousness and duration of the breaches justified the financial penalty, noting that deficiencies in compliance persisted despite guidance and warnings from the regulator.
It also dismissed arguments that the firm’s structure or the proportion of regulated work reduced the seriousness of the misconduct, stating that firms cannot rely on their business models to limit regulatory consequences.
On the issue of the client account, the tribunal agreed that allowing it to be used for transactions unrelated to legal services created a clear risk of facilitating improper activity, including money laundering.
The tribunal ultimately held that the original findings and penalty were proportionate and within the range of reasonable decisions available. The appeal was dismissed in full, and the firm was ordered to pay additional costs of £12,211.