Solicitor fails to respond to money laundering warning signs
The following case illustrates the importance of being aware of the money laundering warning signs and acting on them when dealing with clients.
Mr A was a fee-earner in a small law firm. Mrs Z engaged his services in buying a portfolio of buy-to-let properties.
The two met often and became good friends. One day, Mrs Z mentioned that she had found a suitable property but could not proceed due to temporary cash flow difficulties. She asked if 
Mr A could provide a short-term loan on interest.
Mr A agreed and wrote a cheque on his personal account to lend her the money. He did not advise Mrs Z to take independent legal advice, which could have resulted in a conflict of interest. The transaction went ahead and, shortly afterwards, Mrs Z settled the loan in cash. Mrs Z explained that her tenants tend to pay rent in cash which she stores in her home.
Mrs Z purchased four more properties, each funded by a loan from Mr A or by payments into the client account from unconnected third parties. At around this time, the police contacted the firm’s partners to enquire about the firm’s dealings with Mrs Z.
An inspection of Mrs Z’s file revealed very little. There were no identification documents, or any information about the source of funds. The improper transactions on the client account came to light, although no shortages were identified.
The firm suspended Mr A and reported him to us.
It emerged that the police were investigating Mrs Z due to suspected involvement in organised crime. They suspect the properties were paid for with the proceeds of crime.
Mr A was referred to the SDT.
The red flags in this case were that the source of funds were unusual, the client made large cash payments, there were unexplained payments from third parties which were improperly received into the client account, the lack of information on the client and source of funds, and suspected criminal associations.
Loading...