Returning funds to the client

It is not unusual to have residual funds left over at the end of a matter, for example if a little too much was sent or too little was used. You must differentiate these normal situations from a situation where a money launderer pays in funds for a matter and later asks us to pay it back out to them, thus cleaning the funds. This can be more prevalent on aborted residential property transactions and litigation that looked close to settling and then could not settle.

You need to assess for risk factors present and speak to the Compliance Team if you are unsure of the risk posed by the client. Wherever you decide to return funds to the client, you should ensure it is clear from your file why you have done so and why you have no concerns that doing so could be money laundering. For simple matters, this will be apparent from the normal correspondence; but for unusual matters, you will need a detailed note. You should feel free to ask the Compliance Team to help you write it.

Risk factors that affect returning funds to clients

Reduced risk

• A full and complete understanding of why funds are to be returned. This understanding will need to have been verified by you and you cannot simply take the client's word for it. You will need to have been given independent evidence that satisfies you. For example, it is independent if the other side pulls out, though, where that applies, you must consider whether the planned transaction was a sham from the start. You must not have any suspicions of money laundering.
• Where you have acted for the client before several times without concern.
• Where the matter is entirely normal for the client and consistent with everything you know.

Increased risk

• Any kind of inconsistency between the client and the transaction and/or between how the client runs the matter and how you would expect a client to run a matter of this type, e.g. too little spent/done, a client not taking the usual points to protect himself, a client unusually happy to pay our fees. These are all indicators that the client was never really interested in the matter at hand and only had in mind the wider play of washing funds through us.
• The reason for the request to return funds relates to the client only and thus cannot be verified, e.g. the client has changed its mind.
• A request for funds to be returned to another account or another person. Any mention of cash payments, whether in or out of the firm.
• Usual risk factors about the client, see our guidance on red flags, e.g. clients involved in cash intensive businesses, clients who appear wealthier than you'd expect them to be
• Urgency
• Links to a higher risk jurisdiction
• You never asked for the funds to be paid to you in the first place or the funds sent bear no resemblance to what you asked for/needed
• A client who has asked for funds to be returned to them before, whether on this matter or previous ones.

It is up to you to assess the risks involved in returning funds. Being asked to return funds can be a significant risk factor. If the risks are not low, then we will need to conduct some further due diligence on the client, for example extra source of funds and source of wealth checks. Where you have concerns, we may need to make a Suspicious Activity Report. It is your responsibility only to request a transfer where you have no concerns and could have no concerns about money laundering.