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Inadequate systems: SDT lays out Clydes failings in money laundering case

Details behind one of the largest penalties awarded against a law firm by the Solicitors Disciplinary Tribunal (SDT) have been released after Clyde & Co received a fine of £50,000, while three partners also were also fined £10,000 for breaching accounting and money laundering rules.

In a case brought by the Solicitors Regulation Authority (SRA), corporate partners Christopher Duffy, Simon Gamblin and projects partner Nick Purnell admitted they allowed a client bank account to be used as a banking facility, acting against SRA accounting rules and in breach of obligations under money laundering regulations.

Duffy and Purnell admitted they had failed to take on guidance of the Law Society’s fraudulent financial arrangements in acting as an escrow agent on behalf of the client – a company incorporated in the Republic of Ireland.

Duffy and Gamblin were also asked by another client in the financial repayment industry to hold money for it in the firm bank account after Barclays had closed its accounts. Payments were then made from the account on the client’s behalf. The judgment says the action involved a breach of a number of money laundering requirements. It added: ‘there are a number of good reasons why firms should not allow their client account to be used as a banking facility.’

Clydes was also judged to have failed to follow rules on dealing with dormant client balances.

In the judgment Clydes admitted: ‘the firm previously did not have adequate procedures to deal with the residual client account balances and the residual balances should have been identified and dealt with more quickly, although the firm believed that since 2013 the firm had acted reasonably in its attempts to clear the balances.’

The Tribunal found: ‘it was a matter of concern that such a large firm had failed to deal with this issue for a significant period, up to July 2013. It has also taken a long time to rectify the problem. Also it was clear that the firm’s systems for dealing with queries and concerns about money laundering had been inadequate, which has also led individual partners to be vulnerable to errors.’

It went on to say: ‘the defaults in question were particularly glaring as the firm was a large and, previously, reputable firm; it would be expected to set an example to other firms in its compliance systems.’

In a statement Clydes said: ‘We hold ourselves to the highest professional and ethical standards and take responsibility for ensuring we meet them.

‘We acknowledge the SDT’s judgment that in three matters that occurred in 2013 and prior, we did not meet those high standards and the firm and three of its partners did act in breach of the SRA accounts rules and the Money Laundering Regulations, which also led to breaches of certain SRA principles and code.

‘We believe it to be clear and the SDT’s judgment does not dispute, that any mistakes made were honest and inadvertent. It is not alleged that the firm or the three partners lacked integrity, probity or trustworthiness, or laundered or misappropriated money.

‘We have worked constructively with our regulator, the SRA and we are confident that the circumstances which led to these breaches could not happen again. We have since reviewed and strengthened a number of aspects of our approach to risk management.’

Read the full decision here.