Conveyancing money lost to a fraudster. No AML checks, no trustee relief for lawyers
The impact of money laundering on lawyers is a serious business.
The spectacle of the SRA and the Law Society arguing about who should have supervisory responsibility may be an interesting diversion. Whether the SRA's May 2016 Anti Money Laundering Report paints a positive picture of compliance, or merits a warning to solicitors against money laundering complacency, may be an exercise in the glass half full, half empty, conundrum.
Both of these things will be a dangerous distraction to conveyancers if the warning of HH Judge Pelling QC at paragraph 59 of Purrunsing v A'Court & Co and House Owners Conveyancers Ltd  EWHC 789 (Ch) is overlooked.
The Judge said: "The obligation owed by ACC [the fraudulent seller's lawyers] to the claimant [buyer whose purchase money was stolen] was a strict obligation not to deal with trust assets in breach of trust. If liability for that breach is to be avoided [under S61 Trustee Act 1925] it has to be shown by the trustee that any departure from best or reasonable practice on his part did not increase the risk of loss by fraud. Looked at in this way, in my judgment ACC failed to carry out its Money Laundering Regulations 2007 obligations in accordance with reasonable practice in the circumstances and that failure increased (and had it been necessary to go this far, caused) the loss by fraud."
In a nutshell. Whether you act for the seller or the buyer in a conveyancing transaction. Where purchase money or sale proceeds are lost to a fraudster. If you cannot show your firm carried out client ID due diligence under the Money Laundering Regulations, you can forget asking the court to exercise its discretion under S61 to excuse you as a trustee from having to repay the funds lost through fraud.
If your anti-money laundering policy and procedures are not up to date. If your staff need refresher training to jolt them out of the complacency that our clients are not money launderers or fraudsters. Then give CPM21 a call. It might prove to be the least expensive thing that you ever did.