Bressler Risk Blog

Michael J. Rossi, a partner at Conn, Kavanaugh, Rosenthal, Peisch & Ford, writes on: “Spotting and avoiding ‘material limitation’ conflicts of interest” —

• “Even if two clients are not directly adverse, a conflict of interest may arise if a lawyer’s ability to represent a client is materially limited by the lawyer’s other responsibilities or personal interests. These ‘material limitation’ conflicts are a minefield and are not always apparent. This column provides some tips on how to avoid them.”
• “Comment 8 [to Mass. R. Prof. C. 1.7] provides that a conflict of interest exists if there is a ‘significant risk that a lawyer’s ability to consider, recommend or carry out an appropriate course of action for the client will be materially limited as a result of the lawyer’s other responsibilities or interests.'”
• “The Supreme Judicial Court observed in Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336 (2015), that the ‘critical inquiry’ in analyzing potential conflicts under the second prong of Rule 1.7 ‘is whether the lawyer has a competing interest or responsibility that will materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client'”
• “Material limitation conflicts under Rule 1.7 tend to arise in a number of familiar scenarios. The most common is when a lawyer represents multiple clients in the same matter. If an attorney simultaneously represents an employer and an employee, for example, the lawyer’s ability to recommend a course of action to one client may be impacted by the lawyer’s duty of loyalty to the other. This is especially true when the employee is alleged to have committed misconduct that exposed the employer to a lawsuit.”
• “Joint representation can also pose a problem when a lawyer represents more than one plaintiff in a personal injury case. The interests of joint clients may align at the outset of a case but diverge as the matter progresses, such as when one client wants to accept a settlement offer and the other wants to proceed to trial.”
• “The mere possibility of a future conflict between joint clients does not require a lawyer to decline representation. In practice, lawyers often represent more than one client in a case. The critical question for a conflict analysis is the likelihood that a difference in interests will emerge and, if it does, whether it will materially interfere with the lawyer’s independent professional judgment.”
• “The best approach when an attorney is asked to represent multiple clients is to (a) determine whether the clients’ interests are sufficiently aligned, such that the lawyer can adequately represent both of them, (b) disclose the special considerations for joint representation in the engagement letter, including the sharing of confidential information, and (c) be vigilant about changing circumstances in the case that may require the lawyer to withdraw as counsel for one or both clients.”
• “A second scenario that is ripe for material limitation conflicts under Rule 1.7 is when tensions arise in the attorney-client relationship. If a lawyer makes a material mistake in the handling of a case, the lawyer has a personal interest in not getting sued for malpractice. That interest may interfere with the lawyer’s independent judgment in pursuing a course of action in the client’s best interest.”
• “For example, an attorney who omits a key argument in a brief may be tempted to advise the client in a way that minimizes the mistake, rather than one that maximizes the client’s interests. When a lawyer believes his or her personal interests may be in conflict with a client’s interests, the lawyer should advise the client to seek independent legal advice before continuing the representation.”
• “A third scenario that gives rise to material limitation conflicts is when a lawyer’s action on behalf of one client materially limits the lawyer’s effectiveness in representing another client. These so-called ‘positional’ conflicts often arise when lawyers in the same law firm argue different sides of a legal issue in unrelated matters. The ethical risk is two-fold. On one hand, attorneys may find themselves in the undesirable position of creating legal precedent that is adverse to a client’s interest. On the other hand, a lawyer may be reluctant to advance a particular argument for one client in order not to offend another client.”
• “Positional conflicts are especially tricky because they are not detectable through the conflict check processes that most law firms use. Further complicating matters, the ethical rules on positional conflicts are vague.”
• “Comment 24 to Rule 1.7 states that ‘[t]he mere fact that advocating a legal position on behalf of one client might create precedent adverse to the interests of [another] client in an unrelated matter does not create a conflict of interest.’ Only when the risk of a material limitation is significant must the lawyer refuse the representation or withdraw from one or both matters.”
• “The scenarios discussed above are not exhaustive. Material limitation conflicts can also arise when a lawyer enters into a business transaction with a client (e.g., a promissory note for the payment of fees), when a lawyer has a personal relationship with opposing counsel, or when an attorney has strongly held political beliefs that bear upon the subject matter of a representation.”
• “Material limitation conflicts are subtle and not always detectable through standard conflict check procedures. To avoid them, lawyers should ask themselves at all stages of an engagement whether their professional judgment might be compromised by competing interests, whether personal or professional. If there is any doubt, it is best to seek the advice of an in-house ethics partner or outside counsel.”

“Myovant shareholder lawsuit dismissed by federal judge” —

• “A federal judge in the US District Court, Southern District of New York, has dismissed a lawsuit brought by a shareholder – and putative class representative – of Myovant Sciences, a biopharmaceutical company that was acquired by its majority shareholder Sumitovant Biopharma in March 2023.”
• “The claimant, Joseph Zappia, alleged that Myovant and its directors violated US federal securities laws by filing a false and misleading proxy statement to solicit shareholder approval for the merger. Zappia asserted that the proxy statement failed to disclose that Skadden, Arps, Slate, Meagher & Flom, the law firm hired to advise Myovant’s special committee for the merger, had a conflict of interest because it also represented other companies in the Sumitomo Group, a network of Japanese businesses that included Sumitovant Biopharma and its corporate parent Sumitomo Pharma Co.”
• “Zappia attempted to make the case that Skadden’s conflict of interest compromised its independence and had a deleterious impact on its approach to Myovant and its shareholders, and that it therefore influenced the special committee to accept a low price for the merger and to refrain from soliciting other potential purchasers. In making these allegations, Zappia sought to represent a class of Myovant shareholders who he said had been harmed by the merger.”
• “The judge found that Zappia was unable to produce any facts that demonstrated that Skadden had an actual or potential conflict of interest that would have affected its representation of the special committee. He further noted that Zappia did not actually allege that Skadden had ever represented Sumitovant, the named counterparty in the merger, nor did the claim mention Sumitomo Pharma, its corporate parent. The judge also remarked that the other Sumitomo Group entities that Skadden represented were not operationally integrated with Sumitovant or Sumitomo Pharma. Swatting away the claimant’s reliance on Wilson v Great American Industries [1988], he opined that Zappia ‘read[s] too much into too little.'”
• “Moreover, the judge held that even if Skadden had a conflict of interest, it would not have been material to a reasonable investor, because the information about the firm’s representation of other Sumitomo Group entities was publicly available and did not significantly alter the total mix of information in the proxy statement.”

“Cravath Reveals Work For Ukraine Entities Tied to Hunter Biden” —

• “Cravath Swaine & Moore has disclosed it worked years ago as a foreign agent for Ukrainian businessman Mykola Zlochevsky and his company Burisma Holdings Ltd., according to Justice Department filings.”
• “Cravath partner John D. Buretta, a former Justice Department official, dating back to January 2016 represented Burisma and Zlochevsky, who have been featured in probes of Hunter Biden, the Jan. 4 filings under the Foreign Agents Registration Act show.”
• “Hunter Biden served on the board of Burisma, a Ukrainian energy firm, from 2014 to 2019. Congressional Republicans have said they are investigating whether he worked to influence his father, President Joe Biden, to thwart an investigation of the firm while the elder Biden was vice president.”
• “‘After discussions with the Department of Justice regarding FARA’s scope, Cravath has filed a retroactive registration covering legal services provided to two former clients in March and September 2016, and a supplemental statement terminating the registration as of September 2016,’ Cravath said in a statement.”
  “FARA mandates foreign principals and their advisers make disclosures when engaging in certain activities designed to influence the US government.”
• “‘It is not unusual for DOJ to notify a party of a possible need to register when the department becomes aware of potentially-covered activity,’ said William Minor, who leads DLA Piper’s political law practice. ‘In those cases, the FARA Unit will typically send a ‘letter of inquiry’ requesting further information, and the subsequent back-and-forth will often lead to a party concluding that a registration is advisable, even after the work has concluded.'”
• “Cravath said it was working for Zlochevsky ‘in connection with a possible investigation by the Federal Bureau of Investigation and/or other United States governmental authorities,’ according to a contract dated Jan. 13, 2016 and filed with DOJ’s FARA unit.”
• “Cravath disclosed receiving about $350,000 from the clients for “professional services and advice rendered” between March 2016 and August 2017, according to the Jan. 4 filings.”

“Johnson & Johnson Moves to Disqualify Beasley Allen From Talc Leadership” —

• “Johnson & Johnson has moved to disqualify plaintiffs attorney Andy Birchfield and his firm, Beasley Allen, from the talcum powder multidistrict litigation, citing a new partnership he formed with one of its former lawyers.”
• “Birchfield and his firm have struck an alliance with James Conlan, a former partner at Faegre Drinker Biddle & Reath who worked on Johnson & Johnson’s talcum powder litigation before setting up his own business venture last year called Legacy Liability Solutions LLC.”
• “Their partnership, highlighted in a Nov. 2 Bloomberg Law article by Conlan titled ‘Time to Ditch the Texas Two-Step for a New Mass Tort Strategy,’ seeks to strike a $19 billion deal to resolve talc lawsuits brought by ovarian cancer victims against Johnson & Johnson.”
• “Conlan outlined the details of the proposal in a Nov. 9 letter to Johnson & Johnson’s board of directors, according to a letter attached to a motion Johnson & Johnson filed on Tuesday to show cause why Birchfield and his firm shouldn’t be disqualified from the talc litigation or, at the least, removed from the plaintiffs’ steering committee, where Beasley Allen principal Leigh O’Dell serves as co-lead counsel.”
• “‘Our adversarial system does not work if one side’s lawyers obtain privileged and confidential information from the other’s former counsel,’ wrote Johnson & Johnson attorneys Steve Brody, a partner at O’Melveny & Myers in Washington, D.C., and Susan Sharko, of Faegre Drinker in Florham Park, New Jersey. ‘Where plaintiffs’ counsel forms an alliance with one of defendants’ former attorneys to pursue strategies directly adverse to the defendants in the very same matter, there is only one remedy that will restore fairness and the integrity of the judicial process: disqualification of plaintiffs’ counsel, in this case Andy Birchfield and the Beasley Allen law firm.'”
• “Conlan, who joined Faegre Drinker in 2020, worked on resolving the talc litigation and regularly attended meetings with Johnson & Johnson’s worldwide vice president of litigation, Erik Haas, and other senior in-house counsel.”
• “‘Conlan was privy to wide-ranging, litigation-driven strategy discussions of the strengths, weaknesses, and optimal trial tactics for J&J’s defense of the underlying tort cases that gave rise to J&J’s resolution strategies,’ the motion says. ‘Birchfield entered into his current alliance with Conlan knowing full well that Conlan represented J&J in the same matter. In fact, Birchfield was negotiating potential resolution of the same cases when Conlan was on the other side of the table advising J&J.'”

“Opioid defendant wants Motley Rice disqualified, citing government work” —

• “Optum Rx has moved to disqualify the prominent law firm Motley Rice from representing plaintiffs in pivotal upcoming opioid trials, saying Ohio ethics rules prevent the lawyers from using information they learned working as ‘special assistant attorneys general’ for states in private litigation.”
• “Motley Rice, like other big plaintiff firms, allied with attorneys general and municipal officials to pursue opioid lawsuits on a contingency-fee basis that have so far showered those private lawyers with more than $5 billion in fees. They are continuing with the litigation by targeting any company involved in the opioid business, from consulting firms like McKinsey & Co. to pharmacy benefit managers like Optum Rx, which play a middleman role between drug manufacturers and health plans.”
• “In its latest motion, Optum Rx said Motley Rice used the power of government subpoenas under contingency-fee agreements with Hawaii, the District of Columbia, Puerto Rico and the City of Chicago to obtain tens of thousands of sensitive records that detail Optum’s business strategy, refund agreements with drug manufacturers and other proprietary information.”
• “‘With that confidential information in hand as a roadmap, Motley Rice has turned to litigating opioid and other drug-pricing cases against OptumRx and other PBMs on behalf of various private and public clients,’ the PBM said in the Dec. 15 filing. ‘OptumRx does not challenge the government’s authority to investigate, but it is unethical for Motley Rice to extract confidential information from OptumRx by wielding government power and then, after obtaining the information, to represent other clients in private litigation.'”
• “Optum cited Ohio Rule of Professional Conduct 1.11(c), which prohibits lawyers with ‘confidential government information’ from representing private clients suing the same party. Judge Polster already used that rule in 2019 to disqualify a former U.S. attorney who represented Endo Pharmaceuticals, Optum noted.”
• “In the Hawaii case, Optum negotiated a confidentiality agreement that prohibits Motley Rice from using the materials to guide subpoenas or draft claims ‘in any other matters outside of its representation’ of the Hawaii Attorney General. The firm cited several court decisions that also upheld the disqualification of lawyers who represented government entities and then went on to represent private litigants against the same defendants.”

Coming in at about 100 pages, CNA has published its latest set of law firm risk guidance, best practices, and templates: “Lawyers’ Toolkit 5.0: A Guide to Managing the Attorney-Client Relationship” —

• “The new Lawyers’ Professional Liability Toolkit 5.0 is now available. A consistently popular Risk Control resource, the new Toolkit contains sample materials that will better enable lawyers to mitigate risks that may arise in their practice.”
• “The CNA LPL Risk Control team has designed these assets to establish client expectations, reduce client misunderstandings, improve client communications and address a multitude of challenges faced by attorneys each day.”

The SRA kindly posted videos and resources from its recent event: “Compliance Officers Virtual Conference 2023” —

• VIDEO: “Anti-money laundering – what your firm needs to know“
• Anti-money laundering guidance
• Client and matter risk template
• Client and matter risk assessments
• (Many more videos and resources worth a look, via the top link)

Travelers Insurance shares: “UK: What’s Behind Large Losses in Law Firms?”

• “In a time of economic instability, a law firm that experiences a large loss may find itself in an especially difficult position. In addition to having to ride the waves of the current business environment, the firm could also face higher insurance premiums following the loss, then find less competitive options for professional indemnity cover as a result.”
• “Mitigating large losses can help smooth the waters for firms. Insurers, of course, also have a vested interest in helping their law firm clients anticipate their risks and take action to contain them – and the loss patterns they identify can say a lot about the exposures of a profession.”
• “Large losses are persistent, becoming more costly, and happen for law firms of all sizes: Smith noted that there have been a high number of claims for large losses in recent years and the total severity of those claims has been trending up. While one might assume large firms are responsible for the largest losses, these claims tend to spread across all sizes of firm, not just the large or small firms.”
• “The top five areas driving large losses in law firms appear consistently over time: From 2001-2023, commercial work represented 30% of claims notifications and 50% of damages claimed. The remaining four areas included commercial litigation, commercial property, residential property, and trust & probate. However, commercial work remains a clear outlier in the severity and frequency of its risks to firms.”
• “There are patterns in the kinds of errors that lead to claims for large loss: Firstly, large loss cases tend to involve more failures of advice than in the overall book. Secondly, the most frequently notified errors pertain to retainer management failure. These errors are often very simple, such as not following instructions, taking the wrong step in a process, or missing a time limit. Finally, dishonesty has been on an upward trajectory since 2020 and involves a mix of methods, such as identity theft, fraudulent sellers, or the interception of payments and the changing of bank details.”
• “Mapping legal work areas onto errors reveals more specific risk management targets: Commercial work presents the main challenge for firms looking to reduce errors in retainer management, drafting and advice as all three areas are claim hotspots. Commercial property and commercial litigation generate claims in retainer management and advice. In residential conveyancing, claims involving dishonesty (whether the dishonesty is by an employee or a third party) are a hotspot where firms could focus their attention.”
• “Retainer management errors, for example, tend to be simple mistakes and tend to be the result of human error, such as distraction, in turn caused by stress, pressure or fatigue. Where slips and lapses in procedure occur, a firm should ask whether this is possibly a reflection of the culture of a firm as a whole and whether steps could be taken to address or improve the work environment. While many firms have taken steps to support the mental wellbeing of their employees, recent research has found that these changes haven’t gone deep enough. Indeed, while nearly three-quarters of law firms report having initiatives in place to support employees’ mental health, this year there has been a 24% increase in the number of people contacting LawCare, the mental health and wellbeing charity for legal professionals.”

“After $97 million med-mal verdict, doctors sue insurer for making them tort reform ‘pawns’” —

• “The Iowa Supreme Court was supposed to hear oral arguments next week in the appeal of a record-setting $76 million medical malpractice judgment against an obstetrics and gynecology clinic accused of causing an infant’s severe brain injuries.”
• “That appeal is now stayed amid a blitz of accusations and counterattacks, in both state and federal court, by the medical clinic and the company that provided its malpractice insurance. A case that began as a dispute over the tragic consequences of one infant’s birth has transformed into a high-stakes examination of an alleged conflict between the interests of a policyholder that allegedly wanted to settle and avoid trial and an insurance company that was dedicated to changing malpractice law.”
• “The clinic at the center of the litigation, Obstetrics and Gynecological Associates of Iowa City and Coralville, had a $12 million malpractice insurance policy from MMIC Insurance, a subsidiary of Curi Holdings. Under the terms of the policy, MMIC led the clinic’s legal defense, hiring law firm Shuttleworth & Ingersoll to represent the clinic during the 2022 trial that resulted in a $97 million damages verdict for the family of the injured child. (The verdict was later reduced to a $75 million judgment.)”
• “The clinic now contends in a state-court lawsuit that MMIC had an ulterior motive for refusing to settle the malpractice case: The insurer, which had spent years lobbying for Iowa to pass legislation capping noneconomic damages for medical malpractice victims, wanted to use the clinic and its doctors for its own “propaganda” purposes.”
• “The clinic’s Nov. 21 complaint also named Shuttleworth & Ingersoll as a defendant, alleging that the law firm breached its fiduciary duty and committed malpractice by deferring to MMIC and refusing to engage in pretrial settlement talks with the plaintiffs in the malpractice case.”
• “The insurer, meanwhile, has moved in federal court to enjoin the clinic’s new lawyer, Rowley, from representing the doctors and from engaging in settlement talks with lawyers for the injured child’s family. Alternatively, the insurer said, the court should order the clinic to pay back the $12 million policy proceeds it received from MMIC and should declare the clinic’s insurance contract to be void.”
• “Rowley and his clients previously told the federal judge, in a filing last July, that MMIC was acting in bad faith and should be deemed to have lost the right to control the defense of the malpractice case. That filing — an answer to MMIC’s original federal-court complaint seeking an injunction to block Rowley from dismissing the Iowa Supreme Court appeal — presaged the clinic’s claim in its Nov. 21 lawsuit that MMIC had refused to settle the underlying malpractice case in order to capitalize on the doctors’ plight as it lobbied for Iowa to pass a cap on damages.”
• “MMIC’s new motion for a preliminary injunction argued that Rowley and the clinic had done exactly what the insurer feared when it first filed the federal court suit, manufacturing a conflict for the Shuttleworth firm in order to seize control of the malpractice appeal from MMIC.”
• “If anyone is conflicted, according to the insurer, it is Rowley, whom MMIC accused of colluding with the plaintiffs’ lawyer in the underlying case to sandbag the appeal. It’s all unquestionably a big mess to be unsorted by Rose and the Iowa judge who oversees the clinic’s case against MMIC and the Shuttleworth firm.”

“Calif. Roundup Trial Kicks Off After Monsanto Loses Bid to Boot Judge” —

• “Another Roundup trial started on Monday in California after Monsanto failed to disqualify the judge.”
• “Jury selection began in San Benito County Superior Court, where Monsanto, now owned by Bayer, attempted to remove Judge Patrick Palacios from the trial. After Palacios rejected the disqualification motion, Monsanto filed a Nov. 29 petition for writ of mandate before California’s Sixth District Court of Appeal, insisting that ‘if this court does not immediately stay the case below and issue the requested writ of mandate, Monsanto will be forced to go to trial with a judge who Monsanto believes is prejudiced against it and one of its attorneys.'”
• “‘Unless this court stays the case below, grants this writ, and reverses the Superior Court’s order, the trial in the matter below will proceed under the supervision of a judge who Monsanto and its counsel believe is prejudiced against them,’ wrote Monsanto attorney Shook, Hardy & Bacon partner Jessica Grant in the petition, which didn’t give specifics about the judge’s alleged bias.”
• “‘Bayer believes that the California Court of Appeal for the 6th District should grant its petition for a writ, immediately stay the case, and ultimately reassign the Jones case to a new judge,’ Bayer said in a statement prior to the Sixth District Court of Appeal’s decision. ‘The company believes that the current judge is prejudiced against the company and one of its attorneys and should not preside over the trial. California law provides that peremptory challenge should be ‘liberally construed’ in favor of ensuring public trust in the courts.'”
• “Last month, a jury in San Diego County Superior Court awarded $332 million in a Roundup trial. That verdict was one of four that hit Bayer in the past month, ending a streak of nine defense wins in a row. The others included awards of $1.25 million and $1.56 billion, in separate Missouri state courts, and a $175 million verdict in the Philadelphia Court of Common Pleas, where another trial is wrapping up on Monday.”
• “In California, Bayer insisted that Palacios should be disqualified because he wasn’t an “all purpose” judge assigned to the case… ‘Specifically, Judge Palacios repeatedly emphasized over many months that he would not try this case,’ Grant wrote in Monsanto’s petition. ‘he advised that consistent with the practice of San Benito County Superior Court for long trials, this case would be assigned to a temporary or visiting judge for trial.'”
• “‘The method of assigning cases did not instantly pinpoint Judge Palacios as the judge whom the parties could expect to ultimately preside at trial; and Judge Palacios himself repeatedly confirmed that he was not expected to process the case in its totality,’ she wrote.”

Amy G. McClurg & Jennifer S. Roach at Thompson Hine remind us: “Corporate Transparency Act: Ethical Considerations for 2024” —

• “If you have not heard of the Corporate Transparency Act (CTA), now is the time to become familiar.”
• “The CTA, which Congress passed as a component of the Anti-Money Laundering Act of 2020, was created to enable the government to prevent, detect, and combat money laundering, the funding of terrorism, and other prohibited activity by requiring certain companies to report their beneficial ownership information to the Financial Crimes Enforcement Network division of the U.S. Department of the Treasury (‘FinCEN’). There are still some moving parts with the CTA. For example, the reporting form is not yet available. However, the ethical implications inherent in CTA compliance must be considered now.”
• “Companies that are deemed to be ‘Reporting Companies’ are required to report beneficial ownership to FinCEN. There are two types of ‘Reporting Companies’: Domestic Reporting Companies and Foreign Reporting Companies. There are currently twenty-three (23) exceptions that exempt entities that would otherwise be considered a Reporting Company. Lawyers and law firms alike will want to consider whether they intend to assist clients in ascertaining whether the client is a ‘Reporting Company.'”
• “Of specific interest to attorneys – the CTA also requires up to two ‘company applicants’ to be identified for entities formed after January 1, 2024. This may implicate law firms if they are involved in the preparation or filing or formation documents for clients. The lawyers or paralegals providing those services would have the corresponding obligation under the CTA to register with FinCEN as a company applicant for the client.”
• “The effect of the CTA is far-reaching. Many practitioners will feel the impact it has on their practice, but all practitioners should know about it. Lawyers have a duty to stay abreast of changes to the law and the reporting requirements found in the CTA certainly qualify as a change. For example, the CTA likely implicates the provisions you want to include in employment agreements, shareholder agreements, or LLC operating agreements to require beneficial owners to provide the information needed by the entity to comply with the CTA’s reporting requirements. In addition, due diligence for loans, mergers and acquisitions will likely need to include CTA compliance.”
• “Lawyers also have a duty to keep their current clients reasonably informed about the representation. While there is no duty to notify former clients, lawyers will want to be diligent in notifying current clients about the CTA. Now is the time to determine if the client is former or current.”
• “Don’t wait until January to determine your firm’s capacity or desire to handle CTA related engagements and how it impacts various practice areas. Limitations on the scope of your representation will need to be clearly communicated with your clients. You will want to evaluate any third-party referrals for CTA filings and corporate formation filings. If your firm will play a role in corporate formations and filings, you will want to consider who will be responsible for such filings and how to track and update FinCEN registration for those individuals. Finally, you will want to start thinking of changes in firm policy and procedure that align with your level of involvement in CTA related representations, and ensure all staff are properly trained and supervised to comply accordingly.”

“National firm fined over £100,000 by Solicitors Regulation Authority” —

• “National firm Ashfords LLP has been fined more than £100,000 by the Solicitors Regulation Authority for money laundering compliance failures reported by the firm itself. The fine, the fourth largest imposed by the SRA, was agreed despite the regulator stating that there was no suggestion that any money laundering or other financial crime took place.”
• ‘”In published details of an agreed outcome, the SRA said Ashfords has agreed to pay a penalty of £101,357 plus investigation costs of £1,350. The regulator said it had identified areas of concern in relation to compliance with the 2017 AML regulations and the SRA principles and code of conduct.”
• “Three conveyancing transactions carried out between October 2017 and March 2018 were highlighted as matters of concern. Two of the transactions related to the purchases of properties worth £3.2m and £550,000 on behalf of a limited company. The third transaction related to the purchase of a property worth more than £3m on behalf of a UK registered charity.”
• “In relation to the first transaction, the SRA said customer due diligence revealed conflicting information as to the ultimate beneficial owner and the source of funds was ‘not fully understood or evidenced and had changed during the transaction’. The firm’s compliance raised the issues but there was no written record as to if they were fully resolved before the transaction was completed.”
• “A retrospective search by Ashfords during its own investigation ‘identified a potential link between one of the purported beneficial owners and an entity subject to UK sanctions’, the SRA said.”
• “The firm admitted it failed to behave in a way that maintains public trust and failed to carry out the business effectively and in accordance with proper governance and sound financial and risk management principles.”
• “In considering mitigation, the SRA said the firm ‘had procedures and controls in place; however they were not followed in these matters’. It added: ‘There is no suggestion that the transactions actually involved money laundering or any financial crime.’ There was no evidence that any harm had been suffered, the SRA said. It also noted that the firm had brought the matter to its attention initially, assisted throughout the investigation, admitted breaches, made changes to systems, policies and procedures and ensured that regular training to all relevant employees is provided.”
• “An Ashfords spokesperson said: ‘We self-reported in 2019 to the Solicitors Regulation Authority potential breaches of the money laundering regulations on three transactions that were carried out in 2017 and 2018.”

“Federation of Law Societies launches online program to combat money laundering risks” —

• “The Federation’s of Law Societys has launched an online learning program entitled ‘Anti-Money Laundering and Terrorist Financing in the Canadian Legal Profession.’ The program is free and the Law Society of Ontario has accredited the program for 3 hours and 45 minutes of Professionalism content. From the website:
  • The practice of law exposes legal professionals to unique risks in relation to money laundering and terrorist financing. Although some practice areas present higher risks, any legal professional engaged in financial transactions may be targeted by criminals seeking to launder money or finance terrorist activities.
  • To combat these threats, legal professionals must understand the risks that may arise in their legal practice and be aware of their legal and regulatory obligations. Without such risk-based awareness and knowledge of the rules, they may find themselves unwittingly facilitating or participating in criminal activity.
  • Using interactive tools like scenarios, videos, and quizzes, the Federation has developed this online learning program to provide guidance to legal professionals on how to mitigate money laundering and terrorist financing risks and comply with their legal and regulatory obligations. The program supplements the Federation’s written anti-money laundering and terrorist financing resources for the profession…”
• Access the online learning program directly here.