UK Solicitor Cleared of Failing to Conduct Enhanced Due Diligence on £24 Million Transaction

A UK solicitor has been exonerated of allegations that he failed to carry out enhanced due diligence (EDD) on £24 million paid into his firm’s client account, despite his own admission of the alleged oversight. The Solicitors Disciplinary Tribunal (SDT) ruled that neither solicitor Richard James Morris nor his former firm, Candey, were required to apply EDD on the funds, as alleged by the Solicitors Regulation Authority (SRA). Morris, a former partner at Candey, had "admitted all of the allegations," according to the SDT.

The tribunal concluded that the supposed risk factors highlighted by the SRA, including the size of the funds, their Qatari origin, and a client’s connection to a disqualified director, did not justify the application of EDD. However, Morris admitted to allowing the firm’s client account to be used as a banking facility, for which he was fined £6,000.

The £24 million had been received in 2015 to fund a property purchase for a client, but £21 million of the sum remained unused and was eventually distributed to multiple recipients. The SDT determined that the circumstances did not indicate an elevated risk of money laundering or terrorism financing.

“Whilst the funds received were significant, they were not outwith the experience of Mr Morris, nor were they unusual given the nature of the transaction,” the SDT stated.

“The source of the funds was not an AML risk. Qatar was not on the FATF [Financial Action Task Force] list of high-risk countries,” the tribunal added.

Despite being cleared of failing to conduct EDD, Morris acknowledged that £7.5 million of the funds had been improperly allowed to pass through the client account as a banking facility rather than being returned to the client. The tribunal characterized this misconduct as an "inadvertent and unintentional" lapse in an otherwise "unblemished" career, imposing a £6,000 fine as a consequence.

Furthermore, the SDT reduced Morris’s liability for SRA costs from £64,000 to £10,000, citing procedural delays and the dismissal of most allegations against him.

Candey was also denied its £290,000 costs claim in the same case. Although the firm had been found to have breached anti-money laundering (AML) regulations, the SDT had cleared it of all wrongdoing last September. Nonetheless, Candey was left responsible for covering its own legal expenses.

“The firm had made, and then abandoned, an application to strike out the proceedings,” the SDT stated.

“The Tribunal also found that the costs claimed and time spent on the defence of the allegations was excessive.

“Whilst it was reasonable for the firm to defend the allegations it faced (indeed the Tribunal had dismissed the allegations), its conduct in doing so had been unreasonable such that there was, in the Tribunal’s view, no reason to depart from the starting point of no order as to costs.”

By fLEXI tEAM