In an unflattering revelation ahead of its planned IPO, Mishcon de Reya yesterday (5 January) received the highest-ever financial penalty issued by the Solicitors Regulation Authority (SRA) of £232,500 for a string of failures related to money laundering rules.
The firm, which has also been issued with a £50,000 costs order, admitted to failing to provide adequate due diligence on four client matters. It also accepted it had misplaced the hard copy evidence of the due diligence it carried out on those matters.
The financial ramifications could have been worse for Mishcon – the SRA calculated the penalty as 0.25% of the firm’s £155m turnover (£387,500), but this was reduced by 40% due to mitigating factors, such as the firm’s assistance with the investigation.
According to the judgment, between September 2015 and April 2017, the firm carried out work for two individual clients, and for corporate vehicles connected with those same two individual clients. This work related to a non-SRA regulatory investigation, asset planning for one of the individuals, and the initial stages of the proposed acquisition of two separate entities.
Mishcon believed it had completed due diligence for the clients, but no hard copy evidence could be provided, nor any electronic records.
The SRA also said that both proposed acquisitions presented a ‘higher risk of money laundering or terrorist financing’ under the relevant money laundering legislation in force at the time, because they involved companies in high-risk jurisdictions. This therefore required ‘enhanced customer due diligence’, which was not provided.
Mishcon commissioned an external investigation into the incidents, which found that the partner associated with these client relationships had not received mandatory training as required by anti-money laundering regulations.
In addition, the SRA found that between September 2017 and October 2018, the firm acted in three other property transactions where due diligence was not correctly completed, with Mishcon again failing to retain suitable evidence of this due diligence.
A Mishcon spokesperson said: ‘We are pleased to have come to a settlement with the SRA relating to two separate and historic investigations in relation to which we have made appropriate admissions. Mitigating factors such as our cooperation with the SRA throughout the investigations and the corrective action we have taken since to prevent a recurrence have been recognised by the SRA in reaching this outcome.’
It compounds a difficult year for Mishcon as it gears up for its public listing, with a number of partners leaving the firm during 2021 . This is also not its first regulatory misstep in recent months – in October the firm was fined £25,000 by the Solicitors Disciplinary Tribunal (SDT) for failing to prevent payments being made into and from the client account, with the monies being paid to third parties involved in football transfers.
While there have been larger fines that have resulted from full investigations passed on to the SDT, with Locke Lord’s £500,000 sanction in 2017 being the record, Mishcon’s penalty of £232,500 is the largest to be agreed directly with the regulator. The previous record was the £124,436 penalty the SRA agreed with Findmyclaims.com in March 2019, which related to misleading customers via the firm’s marketing materials.