New Bill to place Conveyancers under further scrutiny
A goldmine for the potential thief; property transactions largely contribute to the huge daily money movement throughout the country, leaving the industry incredibly vulnerable to fraud.
From the opportunist through to the controlled and coordinated criminal they are ready and waiting to steal client cash.
As part of the family of ‘clampdown’ measures The Serious Crime Bill received Royal Assent on 3rd March this year, giving rise to the reality of even more scrutiny on various professionals working within the corporate and finance sectors.
A key part of the legislation, coming into force on 3rd May 2015, is that contained within s.45 SCA 2015. It effectively carries the scope of culpability beyond the professional advisors and also targets directors, senior officers and even third party customers or suppliers who fail to acknowledge suspicious circumstances.
Personal obligations placed on Conveyancers
This without doubt places a responsibility on all to be more vigilant and require the ‘professional advisors’ to ask even more questions before acting upon suspicious requests. It will therefore be essential to know:
1. Who the client is.
2. The purpose of the client’s business.
3. The purpose of the activity which they have been instructed to perform.
The ‘enabler’ offence
The most significant part of the legislation for all professionals, including conveyancers, is at s.45 SCA 2015 where the new offence of participating in the activities of an ‘organised crime group’ could catch an innocent professional advisor unawares if they are not being vigilant enough in their due diligence processes:
s. 45 Offence of participating in activities of organised crime group
(1)A person who participates in the criminal activities of an organised crime group commits an offence.
(2)For this purpose, a person participates in the criminal activities of an organised crime group if the person takes part in any activities that the person knows or reasonably suspects—
(a) Are criminal activities of an organised crime group, or
(b) Will help an organised crime group to carry on criminal activities.
‘Organised Crime Group’ is defined quite broadly; where three or more persons have as their purpose the carrying out of criminal activities:
s.45.6 SCA 2015
(6) “Organised crime group” means a group that—
(a) has as its purpose, or as one of its purposes, the carrying on of criminal activities, and
(b) Consists of three or more persons who act, or agree to act, together to further that purpose.
Conveyancers will need their wits about them – this offence has the potential to be elicited in relation to any activity which could be deemed to assist, enable or is participatory in, for example; a conspiracy to commit a fraud or steal funds where there is the involvement of three or more people.
This ‘enabler’ offence could mean that without thorough due diligence and risk management processes which will help detect and raise suspicion, an innocent conveyancer could find themselves as part of an ‘organised crime group’.
The ‘criminal’ bill with the low threshold…
The Bill received heavy criticism from The Law Society and the Institute of Chartered Accounts in England and Wales (ICAEW) when first introduced regarding the wording of the proposed offence, with the main concern being that the burden imposed on the professional advisor lowered the bar when it came to the objective test of ‘with reasonable cause to suspect’ mental element.
The potential for unwitting, naïve and inexperienced advisors to fall foul of such a low threshold was something that both associations fought to reduce. The result was an amendment to the clause which is now the subjective test of ‘reasonably suspects’.
Nevertheless, the offence still has a slightly lower threshold in terms of mens rea. There is no requirement of proof that one knows what one is doing is actually going to result in the assistance of an offence. The test in this offence here appears to be more about negligence than criminality.
Where does all this leave the conveyancing world?
How do you protect yourselves against not only a professional negligence claim, but now a criminal conviction also? Are your existing client due diligence procedures adequate? Have you an ‘action plan’ for if or when ‘reasonable suspicion’ arises?
The very fact that there need not be proof for intent and guilt serves up a big issue for those law firms who have been lax with their due diligence and risk management procedures.
The legislation adds to the criminal prosecutors’ tool kit – conveyancers now need to ensure that they are one step ahead.
2015 is already shaping up to be the year for enhanced due diligence and risk management procedures. The SRA is half way through its visits to 500 firms and in March it was reported that there had been issues found in 10% of the firms visited which required a re-visit.
AML (Anti-money laundering) processes are already under a high level of scrutiny, and the SRA have made it clear that they are focussed on combatting criminal conveyancer clones and beating bogus law firms. Couple this with the possibility of innocent conveyancers falling foul of this ‘enabler’ offence; 2015 offers tough times ahead for those who have not got their processes sharpened already.
Firms need to be extra vigilant when handling client money and adhering to Principle 10 in light of this new Act. Allow Lawyer Checker to assist you in evidencing due diligence and Outcomes Focussed processes when handling client money.
Call 0800 133 7127 today and speak to an advisor.
