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City firm fined for relying on Ukrainian lawyer for AML checks
24 October 2023

A City firm handling a property transaction between two Ukrainian citizens has been fined around £12,000 for failing to conduct sufficient AML checks.

DKLM LLP, based in the Square Mile, relied upon customer due diligence and source of funds checks provided by a lawyer working in Ukraine. The Solicitors Regulation Authority said the extended due diligence required for this matter was not carried out, with insufficient scrutiny of the background information provided.

A complaint had been made about the firm relating to a transaction for a UK property. The complainant alleged that the firm miscalculated his stamp duty land tax liability and he was not refunded the money he was owed.

Concerns were also raised that the house appeared to be undervalued compared with properties in the same street, and legal costs appeared to be high.

The SRA’s investigation found inadequate checks to the extent that the firm could not accurately know if the funds for the transaction had been paid. The firm was found to have failed to pay sufficient regard to two SRA warning notices about money laundering, although there was no suggestion that the transaction involved any financial crime.

It was stated that DKLM had reflected upon its position and accepted compliance breaches with the benefit of hindsight.

The SRA said the firm breached money laundering regulation by failing to exit the business relationship despite several red flags.

It also failed to adequately identify at the outset of the retainer that the third party lawyer relied upon had previously been struck off by the Solicitors Disciplinary Tribunal.

The SRA said: ‘The conduct showed a disregard for statutory and regulatory obligations and had the potential to cause harm, by facilitating dubious transactions that could have led to money laundering (and/or terrorist financing).’

The potential fine was reduced by 40% due to mitigating factors. The firm had a good regulatory and disciplinary history, cooperated with all investigations and offered a genuine and sincere apology. There was no pattern of misconduct and the firm had since brought in an enhanced training regime with AML training upon induction. A new officer had been appointed to oversee AML work.

The firm agreed to pay a £12,072 fine and £1,350 costs.

Source: The Law Society Gazette, 23rd October 2023

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