Scots conveyancer guilty of ‘professional misconduct’ for breaching lenders’ handbook and money laundering regulations

Scottish Legal News

A Scots lawyer who failed in his duties under the CML Handbook and at common law to provide material information to lenders in conveyancing transactions has been found guilty of “professional misconduct”.

The Scottish Solicitors Discipline Tribunal(SSDT) censured David Clark and restricted his practising certificate for a period of three years after he was found to have breached the Solicitors (Scotland) Accounts, Accounts Certificate, Professional Practice and Guarantee Fund Rules and failed to comply with Money Laundering Regulations.

The tribunal had “no hesitation” in finding Mr Clark guilty of professional misconduct after ruling that his conduct clearly fell “well below the standard to be expected of a competent and reputable solicitor”.

The tribunal heard that the conduct on the part of the respondent involved risks relating to Money Laundering Regulations and the source of funds for the transactions, as well as the breach of the CML Handbook.

Mr Clark, who was a partner in the property department at Hughes Walker Solicitors in Edinburgh between August 2006 and June 2010, had acted in 11 transactions with “significant irregularities” and failed to report “obviously significant” matters to the lenders in some of them.

In two of these cases the seller of the property had provided the deposits for the purchase, but this was not reported to the lenders.

In another two of the transactions the purchase price noted in the instructions given by the lenders did not match the purchase price elsewhere within the files.

There were “significant failures” in respect of the Money Laundering Regulations, the tribunal found.

In many cases he had failed to check clients’ identification and failed to carry out any checks as to the source of the funds for deposits.

Mr Clark admitted the facts in the complaint and admitted professional misconduct.

He said he was “ashamed” of the conduct complained of and apologised for it.

The tribunal was told that he recalled being consulted by one particular property investor who was buying from people using readily available “buy to let” mortgages which would usually involve him buying at reduced prices from people who were desperate to sell and usually part of the deal would be that settlement would be effected within a short timescale.

The transactions came at the time of the recession and business was “hard to come by”.

He was aware that he had not been keeping proper records of ID and Risk Assessments but thought that he had been “otherwise complying with requirements”, particularly in relation to registering titles and securities.

However, he realised that he had not dealt with the cases properly and admitted so to his partners and “effectively turned himself in”.

But the reaction was that the other partners made it plain that they were looking for his resignation and he duly resigned in June 2010.

The tribunal described his conduct as “serious and reprehensible”.

In a written decision, tribunal chairman Alistair Cockburn said: “The parts of the CML Handbook breached in this case are principally designed to prevent fraud. In addition to his failures to report significant matters to his clients, the lenders, the respondent was guilty of serious failures in relation to money laundering checks. Given the respondent’s previous experience, he must have known the risks associated with these failures.”

In mitigation, however, the tribunal accepted that the transactions occurred over a “fairly short period of time” and that there had been “no suggestion” of deliberate dishonesty or personal gain.

He had also demonstrated “clear remorse and insight” into the serious nature of his conduct by cooperating fully with the Law Society, reporting these matters himself and not reapplying for a practising certificate.

Mr Cockburn added: “Having regard in particular to the protection of the public, the tribunal concluded that the most appropriate disposal was a restriction on the respondent’s practising certificate, restricting him to working under supervision for a lengthy period and until he had satisfied the tribunal that he was fit to hold a full practising certificate. Three years was considered the appropriate period for the restriction.”

After the expiry of three years, the tribunal will expect the respondent to be able to show an ability to comply with the CML Handbook before the restriction is lifted.