Solicitor fined £15,000 after missing fraud signs in two loan transactions

Missed red flags

A solicitor was fined by the Solicitors Disciplinary Tribunal (SDT) for failing to identify and appropriately respond to signs of fraud and money laundering.

In 2019, the solicitor was instructed by two different lenders to act on unregulated loans. Both loans were secured against properties and worth a combined total of £464,000.

Clear discrepancies and warning signs of fraud emerged in both transactions.

In the first loan, the borrower’s solicitor changed without explanation.

The solicitor was also instructed to send the funds to a trust and two individuals, instead of the borrower’s solicitor, contrary to the facility agreement.

In respect of the second loan, several irregularities emerged: the solicitor was again asked to transfer funds to an unrelated company – another breach of the facility agreement. Some of the source funds were supplied by an individual with no connection to the lender. In addition, the individuals presented as the borrower’s solicitors were, in fact, imposters.

The solicitor failed to recognise and act on the signs of fraud by the borrowers in both loans.

The solicitor’s firm also failed to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 as the solicitor did not carry out adequate customer due diligence or consider whether enhanced due diligence was needed to protect the lenders they were acting for.

In mitigation, the solicitor took full responsibility for their failings, but stated they were deceived and manipulated by ‘sophisticated criminals’.

The solicitor noted that they had visited the property associated with the second loan to verify the transaction.

They also pointed out that in both instances, the lenders did not suffer any financial loss due to the protection afforded by professional indemnity insurance.

The SDT finding

The tribunal considered two allegations of misconduct, both of which were admitted to by the solicitor.

Because the conduct spanned the transition from the 2011 SRA Handbook to the 2019 SRA Standards and Regulations, the breaches were assessed under both regulatory frameworks.

Allegation one: failure to identify or respond to indicators of fraud and money laundering

The SDT found the solicitor did not spot or respond to warning signs of fraud and money laundering that arose in the two transactions.

Breaches under the 2011 SRA Handbook (pre-25 November 2019):

• Principle 4: act in the best interests of each client
• Principle 6: behave in a way that maintains the trust the public places in you and in the provision of legal services

Breaches under the 2019 SRA Standards and Regulations (on or after 25 November 2019):

• Principle 2: uphold public trust and confidence in the profession
• Principle 7: act in the best interests of each client

The solicitor also breached the Code of Conduct for Solicitors 2019:

• paragraph 3.3: maintain competence to carry out your role and keep your professional knowledge and skills up to date.

Allegation two: causing the firm to breach money laundering regulations

The solicitor’s conduct meant their firm failed to comply with the Money Laundering Regulations 2017:

• regulation 28: which mandates the customer due diligence measures solicitors must take for financial transactions
• regulation 33: which mandates enhanced due diligence for high-risk situations

In light of the misconduct, the solicitor breached multiple SRA Principles.

Breaches under the 2011 SRA Handbook (pre-25 November 2019):

• Principle 6: behave in a way that maintains the trust the public places in you and in the provision of legal services
• Principle 7: comply with your legal and regulatory obligations and deal with your regulators and ombudsman in an open, timely and co-operative manner

The solicitor also failed to achieve Outcome 7.5 of the SRA Code of Conduct 2011, as they did not comply with the legislation applicable to their business.

Breaches under the 2019 SRA Standards and Regulations (on or after 25 November 2019):

• Principle 2: uphold public trust and confidence in the profession

The solicitor also breached the Code of Conduct for Solicitors 2019:

• paragraph 7.1: keep up to date with and follow the law and regulations governing their work, and to justify their decisions and actions to demonstrate compliance

The SDT sanction

The SDT considered both allegations, together with the repeated regulatory breaches across the two frameworks, when determining the appropriate sanction.

The tribunal decided the seriousness of this misconduct warranted a fine of £15,000.

The solicitor was ordered to pay costs of £35,386.90.

Your professional obligations

Solicitors are subject to strict ethical and regulatory duties intended to protect clients, uphold the rule of law and maintain public confidence in the profession.

These obligations extend beyond technical legal knowledge and require solicitors to act with integrity, exercise sound judgement and remain alert to potential risks.

The mistakes made in this case were serious and avoidable.

The SDT’s judgment highlights the importance of continuing competence, including maintaining legal, ethical and regulatory understanding.

Ongoing development is essential to ensure solicitors can identify and respond to complex or evolving fraud and money laundering threats.

As criminal methodologies grow more sophisticated and technology evolves rapidly, solicitors must make sure their knowledge remains current and they apply regulatory requirements rigorously in practice.

The Solicitors Regulation Authority (SRA) investigates matters of alleged misconduct in the solicitor profession. It has the power to impose fines, issue warnings and restrict work.

The SRA can also refer cases to the SDT, which has unlimited powers to fine, suspend or strike off solicitors who commit misconduct.