The Solicitors Disciplinary Tribunal has struck off a solicitor who failed to request references from a conveyancer who went on to commit fraud.
It was found that that the man – referred to as NK – had been taken on by solicitor Ernest Mugadza under a consultancy agreement.
Prior to NK’s employment, Mugadza acquired a BT utility bill, his expired passport and a copy of his practising certificate from the year before.
Mugadza stated that the five-year visa that was included in NK’s passport alleviated any doubts about his right to work in the country.
However, this passport, alongside the practicing certificate, were checked by an investigatory officer from the Solicitor’s Regulation Authority (SRA). She concluded that the details in the passport were false and stated that the reference number on the practicing certificate related to a completely different solicitor.
She said that this number has been “superimposed onto the certificate” alongside NK’s name.
In 2016, Mugadza had recruited an office manager at London based Denning Solicitors. As well as being the sole director of the firm, he was also the COLP and the COFA.
Known as RW, the office manager provided Mugadza with his bank statement, bank cards, passport and driving licence. However, a personal or professional reference was again absent.
RW referred NK to Mugadza, stating that he could introduce new clients to the firm as well as use his experience in conveyancing.
In order to filter out questionable transactions, Mugadza stated that the firm used a “two part process” when approving payments. This involved RW receiving a completion statement from NK. Using online banking, RW would then create a payment request and let Mugadza know that this had occurred.
Despite this system being in place, the SRA found five transactions which ‘bore the hallmarks of mortgage fraud’. From these, ten payments had been sent to third parties.
The most significant involved a sum of £1.74 million being sent to the firm as a loan for a property purchase. Four further payments were then authorised by Mugadza, who was the client account’s sole signatory.
The tribunal ruled that there was no evidence that any payments made had related to the transaction.
As well as failing to conduct the necessary enquiries into his prospective employees, Mugadza also admitted to failing to exercise adequate supervision of NK.
He also admitted to authorising payments to third parties without adequate scrutiny and failing to adhere to Money Laundering Regulation and solicitor’s accounts rules.
Despite telling the tribunal that he had believed NK and that the submitted payment requests were genuine, the SDT stated that he had ultimate responsibility for the firm. The said that he had over years of post-qualification experience and should have recognised the importance of safeguarding client funds. This was regardless of his lack of direct experience in conveyancing.
In 2011, Mugadza had received a fine for £15,000 along with further costs for breaches of accounts rules and failing to inform the SRA of a firm’s closure. The tribunal stated that he “had not heeded the lesson” of this previous sanction.
This time, as well as being struck off, the SDT ordered him to pay £14,300 in costs.
