Tribunal slaps Clyde & Co with £500k fine for AML failures

Leading City firm Clyde & Co has been fined £500,000 by the Solicitors Disciplinary Tribunal (SDT) – equalling the highest amount ever – for money laundering offences.

It has also to pay one of the largest costs awards, of £128,197.

Former partner Edward Mills-Webb was fined £11,900 as well and ordered to pay costs of £54,942.

Clyde & Co admitted that, in relation to 14 transactions, it failed to carry out adequate due diligence on a company and then failed to conduct adequate ongoing monitoring.

It also failed to do adequate due diligence on the principals involved in the transactions, admitting that either more due diligence material should have been obtained or the transactions should have been stopped.

Mr Mills-Webb admitted that he “materially contributed” to these failures.

The full SDT ruling should be published in the coming weeks.

Clyde & Co suspended Mr Mills-Webb in early 2019 and referred him to the Solicitors Regulation Authority (SRA). He left the firm during the investigation.

In a statement, the law firm 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.”

Herbert Smith Freehills, which represented by Mills-Webb, said he had no comment. He is now a consultant at City firm Preston Turnball, a firm set up in 2019 after a group of his fellow shipping partners left Clyde & Co.

Paul Philip, chief executive of the Solicitors Regulation Authority, 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 playing 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 anti-money laundering (AML) processes in place, otherwise they could be facing a similar penalty.”

Back in 2017, Clyde & Co was fined £50,000 and three partners £10,000 each – at the time a record-equalling amount for a firm before the SDT and the highest cumulatively – for allowing its client account to be used as a banking facility and breaching AMl rules. The events dated back to 2013.

The tribunal said the failures were “particularly glaring” as it was “a large and, previously, reputable firm”.

Later in 2017, the SDT fined US firm Locke Lord £500,000 for failing to properly supervise partner Jonathan Denton, who was involved in potentially dubious investment schemes. Mr Denton was struck off in 2018.

The biggest firm handed out by the SRA without going to the tribunal is £232,500 for London firm Mishcon de Reya two years ago, again for AML failures. It could do this as Mishcon is an alternative business structure, which the SRA can fine up to £250m.

However, even under the greater finings power given to the SRA in 2022, it can only fine ‘traditional’ firms up to £25,000. The SRA has long wanted to bring the latter in line with the former.

Clyde & Co is not the only big firm facing the SDT over alleged AML breaches. Last year, the tribunal certified that Dentons – the world’s largest legal practice – has a case to answer in respect of alleged failures while acting for a politically exposed person or his associated entities between around May 2013 and June 2017.

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