In the joint-largest fine ever handed down to a law firm, in March Clyde & Co was hit with a £50,000 penalty for breaching accounting and money laundering rules. In a Solicitors Disciplinary Tribunal (SDT) decision, Clydes corporate partners Christopher Duffy and Simon Gamblin, alongside projects partner Nick Purnell, all received individual fines of £10,000.
The charges related to the use of a client bank account as a banking facility, in direct breach of the Solicitors Regulation Authority (SRA)’s money laundering regulations. Duffy and Purnell admitted they failed to take on guidance of the Law Society’s rules on fraudulent financial arrangements in acting as an escrow agent on behalf of the client.
The tribunal said: ‘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.’
The SRA refers around 150 misconduct cases to the SDT a year. At the end of 2016, the SRA was dealing with a number of cases where reported losses topped £100m. There have already been five cases in 2017, with the number potentially rising to nine before the year is out. One corporate crime partner commented: ‘This issue comes up at the intersection between commercial advice and legal advice. Lawyers have to be very careful that what they’re doing for their client is properly part of a legal service they’re providing rather than pure commercial advice, if they’re allowing for their client account to be used.’
A spokesperson for the SRA said: ‘The role of law firms is to provide legal services, not to provide banking facilities. Rule 14.5 of the SRA Accounts Rules 2011 makes this clear and the High Court and SDT have also shown that law firms must not misuse client accounts by effectively providing a banking facility for clients. Solicitors who breach the rule may, for example, be helping organised crime to launder the proceeds of crime.’
On the decision, Clydes said in a statement: ‘We hold ourselves to the highest professional and ethical standards and take responsibility for ensuring we meet them. 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.’
tom.baker@legalease.co.uk