UK Law Firm Fined Record Sum For Breaching Money-Laundering Rules

A high profile London firm Mishcon de Reya has agreed to pay £232,500 – one of the biggest fines ever imposed by the regulator – over several breaches relating to money laundering rules.

The firm admitted failing to secure adequate due diligence on four related clients and misplacing the evidence of diligence it had carried out.

It was also accepted by the firm that inadequate training was provided for the partner relied on to comply with anti-money laundering regulations, and that funds were improperly transferred from a client ledger to discharge fees and disbursements.

In an agreed outcome published today, the Solicitors Regulation Authority said the financial penalty should be 0.25% of the firm’s £155m turnover – equating to £387,500 but reduced by 40% to take account of mitigating factors.

It is the second regulatory issue faced by Mishcon de Reya in recent months: in October the firm was fined £25,000 by the SDT for failing to prevent payments being made into and from the client account to pay third parties involved in football transfers. The firm has announced its intention to list on the stock exchange after partners voted to go public last year.

In the latest sanction, the SRA stated that Mishcon de Reya carried out work for two individual clients and corporate vehicles connected with them between September 2015 and April 2017. This work related to a non-SRA regulatory investigation, asset planning for one of the individuals and initial stages of a proposed acquisition.

Due diligence was obtained for the two individuals but the firm did not have a hard copy file, which appeared to have been misplaced, and no electronic copy of the records was retained.

Both the proposed acquisitions presented a higher risk of money laundering or terrorist financing, the SRA said, because they involved companies in high-risk jurisdictions. Payments were made in and out of the client account that did not relate an underlying legal transaction and the firm did not send a bill of costs or other written notification of the costs incurred.

An external investigation commissioned by the firm found that the relevant partner had not received mandatory training as required by AML regulations.

The SRA said that separately, between September 2017 and October 2018, the firm acted in three property transactions where due diligence was not fully carried out and copies of the checks that were made were not retained.

Mishcon de Reya said it cooperated with the SRA investigation and acknowledged its due diligence and training failings. New IT systems have been introduced with centralised record-keeping to prevent future similar breaches.

The SRA accepted there was no evidence of lasting harm and a low risk of repetition, but noted that the conduct had the potential to facilitate money laundering and any sanction had to act as a deterrent to others. Mishcon de Reya also agreed to pay the SRA’s £50,000 costs.

Following the outcome, a spokesperson for the firm said: ‘We are pleased to have come to a settlement with the SRA relating to two separate and historic investigations in relation to which we have made appropriate admissions. Mitigating factors such as our cooperation with the SRA throughout the investigations and the corrective action we have taken since to prevent a recurrence have been recognised by the SRA in reaching this outcome.’