Don’t A’Court Disaster – Proper AML Checks are Vital

The high-profile case of Purrunsing –v- A’Court (a firm) (2016) is all the proof you need that Anti Money Laundering checks must be taken seriously. They are not an administrative function that you can delegate to a junior member of staff – or worse still, ignore.  You must read and assess all the information and draw conclusions from it. Had Mr A’Court done so in this case, he might not be nursing a headache of at least £230,000.

Cheater.

Although everyone’s focus is on avoiding criminal liability, failure to undertake proportionate risk-evaluated checks can lead to a serious breach of trust by the seller’s solicitors.

In Purrunsing –v- A’Court (2016) the Court considered a seller’s solicitor’s claim for relief under section 61 Trustee Act from breach of trust: they had paid away the purchase money received from the buyer’s lawyer. Completion never occurred because the ‘seller’ was a fraudster, with no title to sell.

The solicitor acting for the ‘seller’ had failed to follow basic safeguards in identifying his client, ignoring warnings in the Law Society’s Practice Note on Property Fraud and Registration. Specifically, they knew, but ignored, the fact that this was an unoccupied, unencumbered property of high value, where the address on the documents provided did not match the registered address for service.

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The Court refused to apply a lesser standard to a vendor’s solicitor than to a purchaser’s solicitor: both are trustees and both are in breach.

The Practice Note sets out what is reasonably required in such circumstances – i.e. to review all the information available, assessing whether it is consistent with the transaction that the client wishes to carry out being a lawful one. This ‘… may include considering whether the client is actually the owner of the property they want to sell’. That will not be appropriate in every case: it depends on the circumstances, but here they were such as to ring alarm bells that all was not as it seemed.

Each case requires a judgment based on the risk posed by the transaction in question. You must get the right documents. The documents might give a message that is not immediately obvious, and it takes skill and judgement to interpret this in relation to all the circumstances. The point is that you cannot ignore what is staring you in the face and you must not delegate the task of reviewing the AML information to those who lack the experience to understand the import of what they are reading.

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The Judge was scornful: ‘The reality is that Mr A’Court simply did not know of the terms of the rules and guidance to which he was subject. Had these enquiries been made as and when they should have been, it is unlikely the fraud would have occurred in the way it did…’

The message is clear: a properly-applied AML policy that is proportionate and risk-based will help offset a claim for breach of trust.

At Enderley we have a great deal of experience in writing risk-based, proportionate AML policies, systems and controls, and on training teams on how to apply them.

Call us, and we will be pleased to help.

Ed Austin

Solicitor