Law firms work hard to comply with their regulatory obligations by implementing policies and procedures that minimise identifiable areas vulnerable to financial criminals. Likewise, the majority of conveyancing solicitors are constantly on their guard.
However, the financial risks of a firm inadvertently providing banking facilities deserve highlighting following a recent case before the Solicitors Disciplinary Tribunal (SDT).
Rule 14.5 of the SRA Accounts Code clearly sets out the relevant prohibition: "You must not use a client account to provide banking facilities to clients or third parties." Any payments in, and transfers or withdrawals from your client account must relate to your delivery of regulated services.
Sufe Miah was a solicitor and sole director at Miah Partnership Ltd in Leeds and got a little out of his depth with some payments made to his firm. As a result, he was fined a hefty £20,000 for exposing his firm to money laundering risks. His misdemeanours involved effectively using his firm’s client account to provide banking facilities to conveyancing clients/third parties.
The deposits related to transactions Miah was dealing with on behalf of various special purchase vehicles (SPVs) involving some 63 transactions. The situation went on for a five-month period and included a deposit of £536,682 from a third-party company which had never actually been a client.
Despite substantial mitigation, the SDT concluded that his conduct amounted to breaches of rule 1.45 of the accounts rules and principles 6 and 8 of the SRA Principles. To exacerbate his situation, Miah was the firm’s compliance officer for finance and administration (COFA) yet he did nothing even when it dawned on him there was a problem and he knew he should have taken action.
So what excuses did he offer for his conduct?
The reasons he gave (which were not formally accepted by the SRA) included that he had dealt with the funds in the way he did so that he could accurately carry out his client’s “sophisticated and occasionally demanding” instructions.
He had also said they had been “pressed for time”, but the money was actually received two and half weeks before completion of the transactions. He also said he did not plan or scheme a way to provide banking facilities; he did not intend to and he regretted his actions.
Nevertheless, he accepted that allowing the firm’s client account to be used as a banking facility was objectionable with the significant risk of it being used by the client for money laundering.
The SDT found Miah’s conduct was serious and represented a serious risk to the profession’s reputation. As well as the fine of £20,000 he was ordered to pay £20,344 in costs.
Practitioners may want to re-familiarise themselves with the SRA’s Banking Facility Warning Notice which explains the risks of a regulated firm providing a banking facility (along with useful case studies).
As para 19.1 says, it is objectionable for a solicitor to be facilitating banking activities - because to that extent they are not acting as a solicitor.
Written by Nicola Laver, a non-practicing solicitor and a qualified journalist. She is also editor of Solicitors Journal.