The Solicitors Regulation Authority (SRA) has fined Leadenhall Law Group £16,100 for failing to put adequate processes in place when acting for a politically exposed person (PEP).

The Norwich firm acted for a non-domestic PEP and their associated companies across 14 residential property purchases between March 2017 and January 2020.

According to the SRA’s notice, the firm recognised the client as high-risk but did not identify them as a PEP – and even where the risk was flagged, the enhanced measures required under the Money Laundering Regulations were not properly carried out. Applying its fining guidance to the firm’s turnover, the SRA calculated a basic penalty of £17,880, reduced by 10% because Leadenhall cooperated with the investigation and has since brought its processes into compliance.

A PEP is someone who holds, or has held, a prominent public position – heads of state, government ministers, senior judges, high-ranking military officers, senior political party officials, and executives of state-owned enterprises – along with their immediate family members and known close associates. The designation is not an accusation of wrongdoing; it reflects the fact that access to public funds and political influence carries a higher inherent risk of bribery, corruption, or money laundering, regardless of the individual concerned. Since January 2024, the Money Laundering Regulations have also distinguished between domestic and non-domestic PEPs, with domestic PEPs treated as lower risk and requiring a potentially lighter level of enhanced due diligence. Each PEP must still be risk assessed on an individual basis.

Why this keeps happening

This is not an isolated case. In the past eighteen months alone, the SRA has fined PCB Lawyers £25,000 and Taylor Vinters £173,000 for materially the same failure: a firm acting for an overseas PEP on property transactions without the enhanced due diligence the regulations require. Three firms, three separate investigations, one recurring problem.

The pattern points to a gap between recognising risk and acting on it. Flagging a client as high-risk is only the first step. The Money Laundering Regulations set out specific, non-negotiable actions once a PEP is identified: senior management must approve continuing the relationship, the firm must take adequate measures to establish source of wealth and source of funds, and the relationship then requires ongoing enhanced monitoring for as long as it continues. We covered the distinction between source of funds and source of wealth checks, and what “adequate measures” looks like in practice, in our earlier piece on strong source-of-funds checks.

It is worth remembering that PEP status is a risk designation, not an accusation, and plenty of firms act for PEPs without incident. The difference lies entirely in whether the enhanced due diligence framework is actually applied and maintained, not just written into a policy document.

Property work remains a particular exposure point

All three recent cases involved residential property transactions. Conveyancing continues to be one of the higher-risk service lines for AML purposes, precisely because of the volume of client funds moving through firms and the ease with which corporate structures can obscure beneficial ownership. Our glossary entry on enhanced due diligence and PEPs sets out the baseline definitions firms should be working from, and our guidance on the FATF grey list update walks through what enhanced due diligence looks like when a transaction combines a PEP with a higher-risk jurisdiction or corporate vehicle. (You can read the latest FATF update from June here)

It is also worth noting the distinction the SRA now draws between domestic and non-domestic PEPs, following the January 2024 amendment to the Money Laundering Regulations. Domestic PEPs are treated as lower risk and require a potentially lower level of enhanced due diligence than non-domestic PEPs – a point we set out in our summary of the SRA’s updated money laundering sectoral risk assessment. Getting that distinction right matters: over-applying EDD wastes resource, while under-applying it is exactly what has led to fines in these cases.

What firms should check now

• Does your onboarding process include a positive PEP screening step, separate from general high-risk client identification — not just a box left to a fee earner’s judgement?
• Where a PEP is identified, is there a documented senior management sign-off before the relationship proceeds?
• Are source of wealth and source of funds checks recorded as distinct steps, with evidence retained on file?
• Is ongoing monitoring built into file review, rather than treated as a one-off check at onboarding?

These are the questions the SRA has asked firms to report on in its recent AML data collection exercises, including how many PEP clients a firm has acted for and what proportion of matters received enhanced due diligence – detail we covered in our note on the SRA’s AML data collection requirements

None of the recent cases stemmed from a lack of access to PEP data; screening tools that would have caught the issue are widely available and already used across the sector. Firms relying on manual checks or a client’s own declaration should consider a dedicated screening tool such as SmartSearch or Veriphy, both built specifically for UK legal AML compliance and integrated into onboarding, or LexisNexis Risk Solutions and LSEG World-Check for firms wanting a broader institutional-grade PEP and sanctions database. The right choice depends on firm size and case management integration, but the underlying point holds: a basic commercial screening subscription would likely have flagged the client in each of the recent SRA cases before the transaction proceeded.

How Enderley can help

A compliance audit or file review is the most reliable way to test whether PEP identification and enhanced due diligence are working in practice, rather than only on paper. Enderley Consulting supports SRA-regulated firms with:

• Compliance audits and gap analysis, including AML and PEP file reviews
• COLP and COFA support retainers
• Annual declaration preparation
• Staff training on PEPs, sanctions and source of funds/wealth checks via our Enderley Infohub webinar platform, including our MLCO and MLRO Masterclass

Get in touch to arrange a file review before your next SRA inspection finds the gaps