The Solicitors Regulation Authority has fined Leadenhall Law Group Limited £16,092 for failing to identify a politically exposed person and establish source of funds and wealth across 14 residential property purchases between March 2017 and January 2020. The firm recognised its client as high-risk but did not execute the specific enhanced due diligence steps required under Regulations 28 and 35 of the Money Laundering Regulations 2017.
The client was a non-domestic PEP acting through associated companies. All 14 transactions completed. The SRA described the misconduct as "serious" due to a "pattern identified across the files" but classified the impact as "medium". The fine, reduced from a higher sum for cooperation and subsequent compliance, establishes a penalty baseline for systemic PEP identification failures even where no money laundering is proven.
What the regulations require
Regulation 35 of MLR 2017 mandates enhanced due diligence for PEPs. That means senior management approval for the business relationship, reasonable measures to establish source of wealth and source of funds, and enhanced ongoing monitoring. Regulation 28 sets the timing and process for customer due diligence.
The SRA's decision notice makes clear that recognition of risk does not discharge these obligations. The regulator stated that "the firm did not identify its client as a PEP but did recognise the high-risk nature of the client. Despite this, in practice, the required actions as specified in the money laundering regulations were not adequately executed."
The distinction matters. A conveyancer who flags a client as potentially problematic but proceeds without formal PEP screening, documented source of wealth checks or senior sign-off has failed to comply, even if the file shows subjective concern.
The compliance exposure
The £16,092 fine was reduced to reflect Leadenhall's cooperation and subsequent compliance. The SRA does not publish the original penalty figure, but post-mitigation discounts in regulatory enforcement typically range from 20% to 40%. That suggests firms facing similar systemic failures without mitigating factors could face fines exceeding £20,000.
The SRA classified impact as "medium" despite the client category explicitly created to address corruption and asset-stripping risk. The decision notice offers no explanation for that classification. No complaint was referenced, and no funds were identified as illicit. Whether "medium impact" reflects the absence of proven harm or some other threshold is unclear, but it should not be read as minimising the seriousness of the breach.
Conveyancing firms cannot rely on the absence of identified laundering to limit exposure. The penalty attaches to the procedural failure, not the outcome.
Where the gap appears
The case suggests three operational weaknesses that invite regulatory scrutiny. First, firms without integrated PEP screening in their case management systems depend on manual checks that are inconsistently applied. Second, practices that treat enhanced due diligence as a discretionary overlay rather than a mandatory protocol when a PEP is identified will fail the MLR 2017 test. Third, conveyancers handling repeat clients across multiple transactions may assume that initial due diligence covers subsequent matters, but ongoing monitoring obligations persist.
The 14 transactions span nearly three years. That duration implies routine file reviews or an SRA compliance visit exposed the pattern, rather than a single complaint triggering investigation. Firms should expect the regulator to sample files for procedural compliance, not wait for evidence of harm.
The jurisdictional detail is absent. A non-domestic PEP from an EU member state presents different risk than one from a jurisdiction on the Financial Action Task Force grey or black list, but MLR 2017 enhanced due diligence applies regardless. Firms cannot modulate the procedural response based on perceived risk appetite.
What to review now
Conveyancing practices should audit current client due diligence workflows against three questions. Does your system flag PEP status automatically, or does it rely on fee-earner judgement? When a PEP is identified, is there a documented escalation path requiring senior approval before the matter proceeds? Are source of wealth and source of funds enquiries recorded, evidenced and retained in a format that withstands regulatory review?
If any answer is uncertain, the file review should extend beyond current matters to closed transactions over the past three years. The SRA's decision to examine a multi-year pattern suggests limitation periods for enforcement do not shorten the window of operational liability.
Firms using third-party AML or PEP screening tools should confirm that the software flags non-domestic PEPs and that alerts trigger mandatory workflow steps, not merely advisory warnings. A tool that identifies risk but allows the transaction to progress without completing Regulation 35 requirements does not reduce compliance exposure.