Ashfords, a prominent law firm in the South-West, has been subjected to a substantial fine of £101,357 due to inadequacies in handling potential money laundering risks in three property transactions. Notably, two of these transactions might have involved a sanctioned entity.

The Solicitors Regulation Authority (SRA) pinpointed lapses in the client onboarding and ongoing monitoring processes at the Exeter-based firm. The SRA’s investigation revealed that both the fee-earner and the compliance team at Ashfords failed to appropriately address or document red flags, leading to significant sums being received into the firm’s client account without proper evidence of source of funds.

In a regulatory settlement agreement with the SRA, Ashfords acknowledged the fine, marking its second such agreement in three years. Previously, in late 2020, the firm had incurred a £16,200 fine for holding over £1 million in its client account unrelated to any legal services provided.

The recent agreement highlighted three conveyancing transactions between October 2017 and March 2018, where Ashfords represented the buyers but received instructions from a third-party property investment company. Significant concerns were raised about the ultimate beneficial owner of ‘Client A’, a company involved in property purchases of £3.2 million and £550,000. The firm’s due diligence revealed conflicting information about the owner and unclear source of funds, which were not fully resolved prior to transaction completion.

An internal investigation by Ashfords later uncovered a potential link between a purported beneficial owner of Client A and an entity under UK sanctions. At the time of the transactions, the firm had not conducted electronic AML searches for this individual, failing to address potential sanctions risks.

Another transaction, involving a UK-registered charity ‘Client B’, also raised red flags. Ashfords initially acted for a different client in a transaction exceeding £3 million, only to change the client to Client B later. The charity lacked sufficient funds for the purchase, planning to secure a loan from a trustee. However, Ashfords did not provide adequate documentation or customer due diligence related to the trustee or the source of funds.

Ashfords admitted to multiple breaches of the 2017 Money Laundering Regulations. While the firm had AML procedures in place, they were not adequately followed in these instances. It was also noted that there was no direct indication that these transactions involved actual money laundering or financial crimes.

The SRA determined that a financial penalty was an appropriate response, considering the potential for significant harm, although no lasting damage to consumers or third parties was evidenced. Since these incidents occurred over five years ago, the firm has reportedly invested significantly in enhancing its AML processes and compliance team. The compliance team members involved are no longer with the firm.

Ashfords cooperated throughout the investigation, admitting to the breaches, updating its systems, policies, and procedures, and ensuring regular training for relevant employees. The initial fine calculated based on Ashfords’ turnover was nearly £169,000, which was reduced by 40% to account for the mitigating factors.

In addition to the fine, Ashfords has agreed to cover the SRA’s costs of £1,350. This case underscores the importance of rigorous adherence to AML regulations and the consequences of non-compliance in the legal sector.