https://www.legalbusiness.co.uk/blogs/a-timely-reminder-sdt-issues-joint-highest-ever-fine-in-anti-money-laundering-crackdown/
The Solicitors Disciplinary Tribunal has fined Clyde & Co £500,000 and former partner Edward Mills-Webb £11,900 following a slew of anti-money laundering breaches.
At a hearing that took place last week (9-11 January), the SDT considered a statement of facts and admissions agreed by the parties, ultimately finding all allegations to be proved. The SDT ordered Clyde & Co to pay a £500,000 fine, as well as contributing to the SRA’s £128,197.48 costs. Meanwhile, Mills-Webb was ordered to pay a £11,900 fine and contribute towards the SRA’s £54,941.77 costs.
Mills-Webb resigned from Clyde & Co in 2019 and is now a consultant at marine insurance specialist Preston Turnbull.
In the admissions, Clyde & Co admitted to breaching several anti-money laundering regulations including failing to carry out adequate customer due diligence (CDD) on a client and failing to carry out adequate ongoing monitoring of this client.
Due to these failures, the firm admitted to breaching principles 6,7 and 8 of the SRA Principles 2011 as well as failing to reach outcome 7.3 and/ or 7.5 of the SRA Code of Conduct 2011.
Meanwhile, Mills-Webb admitted to materially contributing to Clyde & Co’s failure to carry out adequate CDD checks and materially contributing to Clyde & Co failing to take adequate steps to check what ongoing monitoring of the client was being carried out. He too was found to be in breach of the same SRA Principles and failing to reach the same outcomes of the SRA Code of Conduct 2011 as his former firm.
The SRA was represented at the hearing by Andrew Tabachnik KC of 39 Essex Chambers who was instructed by Ian Brook of Capsticks. Clyde & Co was represented by Ben Hubble KC and Saaman Pourghadiri of 4 New Square Chambers. Mills-Webb was represented by Helen Evans KC and William Birch of 4 New Square Chambers. They were instructed by Herbert Smith Freehills.
The £500,000 fine is the joint-highest fine ever issued by the SDT, matching the £500,000 issued against Locke Lord in 2017 after failing to properly supervise partner Jonathan Denton. Denton was involved in potentially dubious investment schemes and was struck off in April 2018.
Prior to this, the highest fine given out by the SDT in relation to money laundering offences was in 2014 when Fuglers was fined £75,000 after allowing Portsmouth FC to use its client account as a bank account.
Commenting on the fine, Legal 500 Next Generation Partner for professional discipline, Andrew Pavlovic of CM Murray, said: ‘The size of the fine is particularly significant considering the conduct was self-reported, and there was no evidence that the relevant transactions did actually facilitate money laundering or financial crime.’
‘However, there were clearly a number of risk areas associated with the work and the failure to undertake the required due diligence appears to have persisted over a number of years, notwithstanding repeat transactions,’ he added.
The high-value fine marks a display of intent from the regulator, which in recent months has drawn criticism over its perceived lack of involvement during the collapse of Axiom Ince, of an increasingly hardline approach to anti-money laundering failures.
SRA chief executive, Paul Philip, said: ‘Money laundering is not a victimless crime and firms have a key part to play in preventing legal services from being used by criminals. Firms must ensure they are paying proper attention to identifying clients and mitigating money laundering risks. This fine should be a wake-up call to any firms that are not meeting their responsibilities to have robust AML processes in place, otherwise they could be facing a similar penalty.
In a changing regulatory landscape, firms will need to double down on AML procedures or risk facing substantial fines. ‘This sets a precedent regarding the seriousness with which the SRA/SDT will assess AML failures. AML has been a consistent focus of the SRA for several years now and the size of this fine indicates the necessity of firms having robust due diligence and file opening procedures,’ Pavlovic explained.
‘Now that the SRA has the power to issue unlimited fines for failures to detect or prevent economic crime, this development serves as a timely reminder of the potential for large scale fines,’ he added.
In a statement Clyde & Co said: ‘Clyde & Co sincerely regrets any compliance failings – relating to a series of client shipping transactions that we identified in 2018 – which led to this hearing. Having reported the issue to the SRA, we fully assisted with its investigation and have sought to learn appropriate lessons.’
‘Under the firm’s current leadership, we have significantly enhanced our risk management and regulatory compliance capabilities including restructuring our in-house risk and legal functions; appointing a Head of Financial Crime; and further enhancing our processes, policies, levels of oversight and training.’
‘We hold ourselves to the highest professional and ethical standards and take responsibility for ensuring we meet them. This SDT determination is a reminder that regulatory compliance and risk management requires continuous, diligent attention. Our senior management is fully committed to ensuring firm-wide adherence.’
