Risk and Compliance Service

Facing a compliance quandary?

  • Print
  • Share
  • Save

Related images

  • Signpost image

The Law Society’s Practice Advice Service is a team of experienced solicitors who have all worked in private practice. They help members with questions about practice and procedure on a wide variety of subjects, including anti-money laundering, costs, conveyancing, client care and complaints handling. 

The Practice Advice Service helpline is confidential and available Monday to Friday 09:00-17:00 on 020 7320 5675.

Below is a selection of recent compliance questions.

I am selling property for a client to a buyer who is represented by a notary. I have checked that the notary is registered with the Faculty Office. Can I assume that the notary will undertake the usual anti-money laundering checks on his client?

Notaries are subject to the Money Laundering Regulations 2007 as they provide legal or notarial services within the meaning of Reg.3(9). For anti-money laundering purposes, you are able to deal with a notary in the same way as if the buyer was represented by a solicitor. Please see Chapter 1 of the Law Society’s Law Society’s practice note on anti-money laundering.

I have been asked to visit a client at home to take instructions for the sale of his property. I have asked him to have his passport and other proof of identity available so I can undertake customer due diligence. Will it be necessary for me to take these away to photocopy so I can comply with my record keeping obligations under the Money Laundering Regulations 2007?

If your firm has a policy that original identity documents must be photocopied, you should explain this to the client before your meeting and agree with him the method by which you will return the originals, perhaps by sending them by recorded delivery the following day.

If the client does not want you to take the original documents away, you are permitted by Regulation 19 to retain ‘references’ to the evidence of the client’s identity.

Paragraph 3.8.1 of the Law Society’s practice note on anti-money laundering suggests that the type of details it would be useful to record might include:

  • reference numbers on documents or letters
  • relevant dates, such as issue, expiry or writing
  • details of the issuer or writer
  • all identity details recorded on the document

In this situation, you might wish to take photographs of the material on your mobile phone and print these out when you return to the office. You must ensure that the details such as the picture and passport number are clear in the photographs.

For further information, please see Chapter 3 of the Law Society’s practice note on anti-money laundering.

A woman living abroad has emailed asking my firm to recover monies due to her from her ex-husband pursuant to a divorce settlement. She has provided a copy of the agreement. The terms are very vague and there is no court or jurisdiction reference.

She said that her ex-husband lives in England, although she has not supplied an address. She has provided documents of her identity by email certified by a foreign lawyer practising in the country where she lives. I have spoken to the lawyer who says he has no recollection of such certification.

A cheque for the full settlement monies has just arrived in my office drawn on a foreign bank account and payable to my firm. The woman is chasing for payment of the settlement monies as her ex-husband has told her the monies have been paid. What should I do?

You should not pay the cheque into your client account until further checks are carried out. If you are not your firm’s Money Laundering Reporting Officer (MLRO), you should discuss this with the MLRO immediately. There are a number of warning signs of sham litigation and this may be an attempt to launder money through your client account.

While Bowman v Fels [2005] EWCA Civ 226 held that conducting litigation is not entering into an arrangement contrary to section 328 of the Proceeds of Crime Act 2002 (POCA), this does not extend to sham litigation.

You will need to consider whether it is ethically appropriate to continue with the retainer. Consider seeking further information by searching the names of the parties on the internet as sometimes that will link to information about known sham litigation methodologies.

Your MLRO will be able to access the Law Society’s anti-money laundering forum which is a secure site controlled by the Law Society. It contains information about current known methodologies.

With regard to whether a report to the National Crime Agency (NCA) is necessary, your MLRO will need to consider whether you hold the existing proceeds of crime. Technically, a ‘stolen cheque’ is criminal property whereas a ‘fraudulent cheque’ is an instrument of crime rather than criminal property, unless funds have been drawn down against the cheque. You may not know which type of cheque you have and it may be prudent for the MLRO to consider making a Suspicious Activity Report (SAR) to the NCA under section 332 of POCA.

The NCA will not be able to advise you as to whether the cheque is a ‘stolen’ or ‘fraudulent’ instrument nor advise you about what to do with the cheque. If it is a stolen cheque, you would need consent from the NCA to do anything with it or indeed to hold onto it.

The firm may also wish to make a separate crime report directly to the police, as a SAR is not a crime report. You may wish to hold the cheque on file as evidence of a crime or potential crime.

For further information, please see the Law Society’s practice note on anti-money laundering.

I am the complaints-handling partner in a medium-sized practice. A former client has been threatening to bring a claim against the firm for alleged professional negligence. Although the claim has not yet materialised, I have reported the matter to my insurer. 

The client has now made a formal complaint to the Legal Ombudsman (LeO), who has written asking a number of detailed questions. The letter makes clear that LeO has the power to report my firm to the SRA if we refuse to answer the questions within the time limit stipulated in their letter. 

The wording of my professional indemnity policy states that my firm is obliged not to take any steps which could prejudice the position of my insurer. What should I do?

Outcome 10.6 of the SRA Code of Conduct 2011 states that ‘you must co-operate fully with the SRA and the Legal Ombudsman at all times including in relation to any investigation about a claim for redress against you.’

In order to avoid any allegations of taking action which might be deemed to have prejudiced the position of your insurer, it would be advisable to bring the contents of Outcome 10.6 to the attention of your professional indemnity insurer and seek authority from them to answer the queries raised in the Ombudsman’s letter. As it may take some time for your insurer to consider the matter, it would be prudent to seek an extension of time from LeO in order to provide a detailed response to their letter.

While every effort has been made to ensure the accuracy of the information in this article, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept any responsibility for liabilities arising as a result of reliance upon the information given.

This article is compiled by the Law Society’s Practice Advice Service. Comments relating to the questions should be sent to Mrs Anjali Mouelhi, solicitor and technical lead, Practice Advice, The Law Society, 113 Chancery Lane, London WC2A 1PL.

  • Print
  • Share
  • Save