The Solicitors Disciplinary Tribunal (SDT) has issued the largest penalty against a law firm for a series of breaches that allowed the firm’s client account to be used as a banking facility when there was no underlying legal transaction. Clyde & Co was fined £50,000 and three of its partners (the respondents) were fined £10,000 each.
The case came before the SDT as an agreed outcome, subject to the panel’s approval. The respondents admitted that they failed to comply with their obligations under the Money Laundering Regulations 2007, and failed to take note of the guidance in the Law Society’s fraudulent financial arrangements warning and/or the warning notice on money laundering.
Over a series of transactions, the SDT found no information that the respondents undertook, or proposed to undertake, any legal work in respect of transactions from the client account on behalf of the client. Despite the respondents receiving mandatory Accounts Rules training and the firms risk register identifying that acting as an escrow agent would be a breach of the Account Rules if the firm was not instructed on an underlying matter.
The respondents faced further consequences for their failure to deal with aged residual client balances that amassed in excess of £7.3m on inactive matters which took more than two years to rectify.
The SDT felt that, as the respondents were a large firm with experienced partners; it would be expected to set an example to other firms. It was a matter of concern that the respondents had failed to deal with the issues for a significant period of time. Ultimately, the partners should have known better; there were examples of instances that the risks had been recognised, but they had failed to take adequate actions in response.