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Law firm fined for breaching conveyancing AML rules

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  • 26/11/2020
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Law firm fined for breaching conveyancing AML rules
A law firm has been fined £14,000 for breaching anti-money laundering (AML) rules with respect to three residential transactions.

 

Seatons Law, which is regulated by the Solicitors Regulation Authority (SRA), carried out the conveyancing duties in 2018. 

The first transaction took place in July, where the firm acted on behalf of the seller under the power of attorney, while the seller’s attorney provided Seaton with instructions. 

The risk of the transaction was increased when Seatons did not obtain photographic identification of the seller although they did receive utility bills in their name. The firm also did not meet the seller or their attorney in person. 

Despite this, Seatons claimed it had photographic identification – which was understood to have been obtained at a later date – and completed the transaction in November of the same year with £45,480 being paid into the bank account of the seller’s attorney. 

An order was raised by Her Majesty’s Land Registry (HMLR) in January last year, where it was confirmed the transaction was unable to be completed until additional information was submitted, including forms verifying the identity of the seller and their attorney. 

As of this summer, HMLR has refused to register the transfer and the property is still in the name of the seller. 

Also in July 2018, Seatons was instructed to transfer a property into an attorney’s name as a gift for no consideration. The same power of attorney used for the first property was also used for this transaction. 

The instructions for the transfer came from a third party, however there was no evidence to suggest they were given the authority by the property owner to do so. 

Again, utility bills were submitted but there were no identification documents on file from either the attorney or the property owner. Seatons also did not meet the attorney or property owner in person. 

An application to change the register was completed and submitted to HMLR in August and shortly after, the government department wrote to Seatons asking why the transaction was in the benefit of the attorney and for evidence that the property owner had authorised the transfer. 

The owner, or someone claiming to be them, called the firm to authorise the transfer at the request of Seatonswho then asked for written confirmation. Then in September, Seatons called HMLR to say the attorney was the wife of the property owner and confirmed they had spoken to them on the phone. 

few weeks later, Seatons received an email from the owner, or someone claiming to be them, giving consent to transfer the property to the attorney and registration was completed on 24 September. 

HMLR contacted the firm in March 2019 to ask if customer due diligence had been requested before later contacting again to say the transfer had been objected by the property owner. 

The freehold for this property is currently in the name of the attorney and is pending application. 

The final transaction, which took place in October 2018, involved the same seller and attorney as the first two properties. In this case, Seatons acted on behalf of the lender, seller and buyer for the property worth £330,000. 

The lender provided a mortgage of £231,111 and the rest was to be paid by the buyer. 

The same third party in the second property provided instructions on behalf of the buyer despite there being no evidence they were authorised to do so. 

Utility bills and documents confirming the identities of the seller, buyer and attorney were obtained but neither met with  Seatons in person, and the transaction was completed in December. 

An email between an employee and director at Seatons showed the firm decided not to involve insurers until it had “some feedback on the matrimonial front”. The SRA said this indicated the firm was aware there were issues with the transaction and relationship of the parties. 

The attorney then contacted Seatons and completed an ID1 form to verify their identity and an email was sent to the firm by someone claiming to be acting on the behalf of the seller. The email said the seller had been imprisoned abroad since 2018 and claimed the power of attorney related to the last two transactions were fabricated. 

The final property is still in the name of the seller and the registration of new charges for the property have been rejected by HMLR. 

 

AML rules breach

The SRA found Seatons failed to apply the correct risk rating to the transactions as they were all categorised as being low risk by the firm. This is despite conveyancing being considered one of the largest risks to money laundering by the government. 

It was ruled the firm should have done more to verify the identities of those involved, considering they did not meet them in person.  

Seatons also did not trace the source of the money used to pay the deposit of the final property. 

Additionally, the SRA said the firm failed in these three matters to act on ‘red flag indicators’ including, the firm being based in Northampton with clients based in Luton, instructions coming from an unrelated third party where it was not clear what involvement she had and a property being transferred for nil consideration in unusual circumstances”. 

The firm accepts it failed to have in place, at that time, an adequate anti-money laundering policy and therefore breached money laundering rules. 

The original penalty for the breach was £23,361.50 or 0.9 per cent of the firm’s turnover.  

However, as Seatons assisted with the investigation, accepted its failures and agreed to reduce the repetition of similar issues, this was reduced by 40 per cent to £14,000. 

Seatons has also agreed to pay £3,500 for the cost of the investigation. 

 

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