SDT dismisses allegations against City firm over AML checks

A City firm has been cleared of all wrongdoing after being accused of breaching money laundering regulations.

The Solicitors Disciplinary Tribunal today ruled that allegations brought by the Solicitors Regulation Authority against Candey Limited had not been proven following a substantive hearing.

Its former partner, Richard Morris, had admitted failing to carry out adequate checks on a client, but he was cleared of authorising any payments or of using the client account as a banking facility.

The case is the second time this year in which the SRA has failed to prove misconduct against a firm in relation to compliance with money laundering rules. In June, the regulator was forced to swallow its £189,000 costs after allegations against international firm Dentons were dismissed in full.

The SRA had alleged that Candey failed to ensure that adequate source of funds information was required in relation to a high-value client matter. The tribunal heard that the firm was instructed in 2015 in the sale of a large piece of agricultural land worth more than £20m. The client was the family office of Person C, who was in a relationship at the time with a convicted fraudster. This individual was not a client of the firm and did not give any instructions.

Candey received £24m into the client account to complete the transaction. The SRA submitted that both Candey and Morris were obliged to undertake enhanced due diligence on the client at that stage.

SDT panel chair Paul Lewis said enhanced due diligence had not been mandatory and that the firm had not breached any rules as they were set out at the time.

In his mitigation, Morris said this case had hung over him for four years and it had been a ‘dreadful’ period. He admitted making a mistake but said it was inadvertent and not dishonest or intentional.

He explained that he was a hard-working and diligent solicitor who had lacked experience and training at the time of the transaction.

‘I firmly believe the SRA could have made the position clearer to practitioners and better publicise the application of the [money laundering] rule rather than supplying a warning notice to those who had signed up to a mailing list,’ he said. ‘I do not believe the profession were fully aware or understood the rule in 2015 which was demonstrated by [the SRA] making further amendments in 2018.’

On costs, the SRA told the tribunal it had incurred almost £64,000 in bringing the case and asked for this sum to be paid equally by Candey and Morris.

The firm opposed this and applied for the SRA to pay some of its own (undisclosed) costs, arguing that the regulator had not ‘reached a proper understanding of the money laundering regulations or how they applied to the fact of this case’.

Christopher Convey, representing Candey, said: ‘It seems difficult to envisage how this was anything other than a hobbled case by the SRA from the start.’

Morris was fined £6,000 and ordered to pay £10,000 costs. The tribunal made no costs order in relation to Candey, effectively leaving both sides to pay their own sums incurred.

Following the decision, Candey said in a statement: ’It is regrettable that our regulator did not engage with us on the substantive detail. Had they done so they could have avoided substantial wasted time and costs.’

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