In an ever-changing landscape, keeping abreast of new developments is essential in the legal profession. This week, I delved into the intriguing case of Nirosha Jayawardena, a solicitor who recently found herself suspended from practice by the Solicitors Disciplinary Tribunal for one month.
The decision was an outcome mutually agreed upon by Ms. Jayawardena and the Solicitors Regulation Authority (SRA). Alongside the suspension, there were several stipulated conditions about her future conduct.
The Unraveling of a Complex Case
The case drew me in due to its facts and unique circumstances, which I believe underscore vital points for everyone in the law firm to keep in mind. It serves as a stark reminder of how weak anti-money laundering (AML) controls coupled with non-compliance to Accounts rules can potentially result in substantial losses for small firms.
Within the case, we saw the firm fall prey to fraudulent individuals masquerading as property owners. These fraudsters successfully manipulated the firm into selling properties and directing the proceeds into their pockets. In dissecting what transpired, multiple compliance failures came to light.
Nine Key Lessons
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Small Firms are Targeted
It’s a common misconception that only large firms fall prey to nefarious activities. While it’s true that some criminals target big firms, low-complexity impersonation frauds often zero in on smaller firms. These firms may lack the technological advancements or stringent sign-off procedures that larger firms have invested in, making them an easier target.
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Repeat Offenders
What’s peculiar about this case is the audacity of the fraudsters. After successfully duping the firm once, they brazenly tried their luck a second time. That’s the unsettling nature of fraudsters. They will often test the waters with a legitimate instruction to gauge the firm’s security measures. If successful, they will exploit the vulnerability repeatedly until caught/detected.
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Disruptive Methods for ID Verification
In the case of Jayawardena, the client conveniently couldn’t visit the office but was able to arrive in a taxi. Such disruptions to standard protocols serve to distract the lawyer, hindering their ability to spot discrepancies.
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Passport Errors
In a busy legal environment, it can be tempting to overlook small details. However, every document, especially identification ones, should be meticulously scrutinised. Fraudulent documents are surprisingly accessible and can range in quality. The case underlines the importance of spotting typos or unusual language in documents.
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Ignoring the AML Policy
Needless to say, adhering to your firm’s policy is crucial. Unfortunately, instances of non-compliance do occur. It’s essential to make sure that all guidelines reflect actual practice. Having procedures in place that are habitually ignored only serves to undermine the entire policy.
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Breach of Solicitors Accounts Rules
Impersonation frauds often hinge on payments made to third parties. This case underscores the importance of handling such transactions with extreme caution. Reinforce this within your firm and ensure that the rationale behind such payments is captured in writing.
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Ignoring Warnings in Customer Due Diligence (CDD)
Knowing how to interpret electronic verification search results is a must. Document what your next steps are if the checks don’t pass. Ignoring warning signs can clearly lead to a cascade of issues down the line.
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Failure to Retain and Verify ID Copies
The Regulations mandate that CDD must be retained for 5 years past the end of the business relationship. This case emphasises the importance of not only keeping a copy of the ID but also following through with verification processes like authenticity checks on passports and driving licenses.
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Mandatory Training Courses
An intriguing element of this case was the requirement for Jayawardena to undergo training courses on AML and Accounts Rules. This is a prudent move and, as an trainer, one I wholeheartedly endorse.
While this might seem daunting, remember that knowledge is power. Let’s learn together and fortify our defenses against these ‘baddies’.
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