Simpson Thacher & Bartlett: Firm “regrets certain historic shortcomings”
A leading US law firm has been fined £300,000 for failing to have anti-money laundering (AML) risk assessments and procedures in place in its London office.
The fine for Simpson Thacher & Bartlett is the largest ever for breaches of this nature, although other AML breaches saw City firm Clyde & Co fined £500,000 last year.
The Solicitors Disciplinary Tribunal (SDT) yesterday approved an agreed outcome reached by the Solicitors Regulation Authority (SRA) and Simpson Thacher.
The firm, which has nearly 300 lawyers in London, admitted that, between June 2017 and March 2020, it did not have a firm-wide risk assessment, between June 2017 and October 2022 did not have compliant client and/or matter risk assessments in relation to four files, and between June 2017 and January 2023 did not have in place fully compliant policies, controls or procedures.
All of these are required by the Money Laundering Regulations 2017. There was no suggestion that money laundering actually occurred and the tribunal accepted that the breaches were historic in nature.
They came to light in 2021, when the SRA’s AML proactive supervision team selected Simpson Thacher to undergo a routine desk-based review of its AML controls.
By the time the SRA referred it to the tribunal in November 2023, the firm was fully compliant. At the time, it expressed disappointment that the regulator had taken this step.
A spokeswoman said yesterday: “We are pleased that the tribunal has accepted the resolution agreed with the SRA in respect of this matter.
“The London office of Simpson Thacher & Bartlett LLP acknowledges and regrets certain historic shortcomings in some of our UK AML written policies and procedures and has made significant investments to enhance our robust compliance function.”
The SRA has been using its internal fining powers to sanction a stream of much smaller firms for the same failures over the last couple of years.
However, as Simpson Thacher is structured as a traditional law firm, the SRA could only fine it up to £25,000, which was clearly considered insufficient in the circumstances.
Were such failures to happen now, the SRA would not have to refer the firm to the SDT as the Economic Crime and Corporate Transparency Act 2023 gave it unlimited fining powers for matters relating to economic crime.
An SRA spokesman said: “Money laundering is not a victimless crime and can have detrimental effects on many, many people. Solicitors have an important role to play in keeping the profits of crime out of the profession and the wider UK economy.
“That role is to eliminate the risk of money laundering, not just to catch money launderers. That means having effective policies, procedures and people in place to identify any issues that raise concern.”
Simpson Thacher was also ordered to pay the SRA costs of £62,000.
Regulatory experts say that AML can be a challenge for US law firms in the UK because their parent operations do not face the same obligations.
Last year, the SRA consulted on draft new guidance on its fining framework, including how it intended to apply the economic crime power.
There was strong pushback from the profession and minutes of last month’s meeting of the SRA board, which were published this week, revealed that “given the feedback we had received from stakeholders another consultation would be needed on some elements of the financial penalties guidance”.
It did not say when this would happen, although the SRA will work with the SDT, which is reviewing its own sanctions framework, “to ensure that in so far as possible the two schemes were complementary”.
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