It’s time for your regular round up of compliance news.
Before we launch into it, have you signed up for our Free GDPR seminar on the 19th February yet? We only have a few spaces left – see further information below.
In this week’s newsletter we bring you our blog on the significance of the ‘partner’ title, an update on the landmark conveyancing fraud case, some interesting cases on referral fees, and a look at the Law Society’s summary of the money laundering National Risk Assessment.
Are you a member of our LinkedIn group yet? If not, get in touch with Lisa.
We hope you find it useful, and as always if you have any comments or questions please do not hesitate to get in touch.
Happy reading 🙂
Jon and the team
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Who wants to be a Partner?
Our blog this week looks at the regulatory significance of becoming a partner following the case of Ejaz Ahmad, who was struck off the roll after failing to appreciate the significance of the obligations that the partner title brings.
Conveyancing fraud – The Law Society finally intervenes
Most conveyancers will recall with horror the case of Dremvar v Mishcon de Reya last year. In this case the High Court ruled that city firm Mishcon was liable to its client, who was duped into buying a property from a fraudulent seller, for breach of trust and should bear their client’s loss. There were no allegations of negligence against the firm, or indeed any wrongdoing. If anything, the “seller’s” solicitors had failed to spot that their client was a fraudster. The Law Society is now seeking to intervene in the appeal.
Why it matters
This case has far reaching implications for property lawyers and PI insurers, so it’s not a shock that the Law Society has decided to intervene. The High Court’s reasoning seems to have rested on the fact that someone had to pay, and the bigger firm had the broadest shoulders. But what happens if this sets a precedent, and the next firm to get stung isn’t quite as big? Even if it has sufficient insurance, the hike in premium could sink it. Would we see insurers increasing premium across the board to balance the risk? The profession waits anxiously for the case to be heard.
Referral fees making headlines
This week saw two separate sanctions in respect of referral fees, one against an individual solicitor and the other against a firm. Andrew Clinch was suspended for 30 months following a finding that he had pursued personal injury cases without instructions from clients, and in some instances where the client had notified the firm that they did not wish to pursue a claim. He also paid prohibited referral fees to a referrer.
Meanwhile, KG Solicitors in Blackburn was rebuked for accepting 544 referrals and paying £215,600 to an unauthorised claims management company.
Why it matters
We haven’t seen much in way of enforcement of the PI referral ban so it is interesting to see two cases within a few weeks of each other. Both sanctions were handed out only weeks after the SRA had updated its warning notice on personal injury claims.
The Law Society’s money laundering National Risk Assessment
The Treasury published its money laundering National Risk Assessment (NRA) in October 2017, and the Law Society has now summarised what that means for law firms.
The NRA looks at 3 types of legal services considered to be at high risk:
- trust and company formation (often used as vehicles to hide beneficial ownership);
- conveyancing (around 50% of legal sector SAR are linked to property transactions); and
- client account services (client accounts are the go-to way to clean criminal money)
The Law Society has provided some useful red flags for each 3 high risk area.
The NRA also looks at Suspicious Activity Reports, and potential under-reporting from lawyers. The Law Society argues that there are ‘good reasons’ why the legal sector only contribute 1% of the total SARs submitted, but it encourages the sector to report wherever there are suspicions of financial crime.
Why it matters
The Money Laundering Regulations 2017 require law firms to carry out a practice-wide risk assessment, which should take into account the NRA. It’s important that you therefore consider the NRA and that the conclusions are reflected in your risk assessment and policies. The NCA also provides useful information and red flags that firms should consider circulating the Law Society’s summary to all staff.
Brexit survey
Thompson Reuters and the Law Society have commissioned an analysis of the implications of Brexit on legal services. The survey takes around 10 minutes and can be found here.
LinkedIn group question
Taken from a real scenario, the question posed to our LinkedIn group this week is:
You are acting for a client in a PI matter and are close to settlement. The client writes to you instructing you to pay her damages to an account belonging to her son “because I have an IVA”. What should you do?
Would you like to see the answers and get involved in our group? No problem – contact Lisa on lisa@jonathonbray.com and you will be added to the group.
Disciplinary decisions
- Imtiaz Patel was rebuked and ordered to pay a penalty of £1,750 for backdating a latter to mislead another solicitor that he had complied with a court order. Dishonest but not struck off…
- Peter Naylor was suspended for two years (with that period to be suspended for 2 years) by the SDT. He admitted to sending misleading emails to a client. Dishonest but not struck off…
- Alastair Main was suspended from practice for one year following a conviction for sexual and racially aggravated assault. Lacked integrity but did not fail to uphold the rule of law…
- Nicholas Peterken was struck off by the SDT for carrying out reserved activities when he was not authorised to do so, and providing misleading information to SRA investigation officers.
- Daniel Smith was suspended for a period of 12 months, suspended for 2 years. He admitted to sending misleading emails to a client about the progress of a case, as well as misleading his colleagues. Dishonest but not struck off.
- Daniel Clarke, former head cashier at Geoffrey Parker Bourne Limited, took nearly £1.7m from the firm’s client account. He confessed and is resignation letter said that he had been using client money to ‘keep the firm going’. The partners of the firm admitted failing to ensure that there were proper controls in place to prevent the improper transfer. They were all fined and Mr Kirton, a non lawyer who was the firm’s managing partner, also received a section 43 order, effectively banning him from working in a regulated practice.
