Lessons from Clyde & Co’s £500,000 Fine

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CASE STUDY - Kate Burt, HiveRisk

By now most firms are aware of the well-publicised SDT decision in which Clyde & Co was fined a staggering £500,000 for AML failings. 

The case serves as a stark reminder of the critical importance of Anti-Money Laundering (AML) compliance within law firms.  Particularly for conveyancing firms, the claxon has been sounded clearly by the SRA (as can also been seen from statements of other legal sector regulators such as the Law Society of Scotland) signalling the end of their patience with firms in non-compliance.

The severity of the fine underscores the SRA’s commitment to enforcing AML regulations rigorously. Paul Philip, the SRA’s chief executive, emphasised that money laundering is not a victimless crime, and law firms play a pivotal role in preventing legal services from being exploited by criminals.

Clyde & Co’s fine stems from its failure to carry out adequate due diligence on a company involved in 14 transactions and to conduct sufficient ongoing monitoring. Additionally, the firm neglected to perform adequate due diligence on the principals involved in these transactions, resulting in serious compliance breaches.

A former partner of the firm was also fined but a significantly lower amount of £11,900 with additional costs of £54,942 for materially contributing to the failures, which had been previously admitted. 

The SDT outcome emphasises both the individual and collective responsibilities in ensuring AML compliance within law firms.

Conveyancing firms, in particular, given the nature of their work, must take heed of this outcome and elevate AML compliance to a board-level issue. Failure to do so not only risks substantial financial penalties but also undermines the integrity of the legal profession and poses significant reputational risks.

It’s crucial for all conveyancing firms to recognise that regulatory compliance and risk management demand continuous, diligent attention. While Clyde & Co’s remedial actions since the failings are well publicised and commendable, the SDT decision serves as a reminder that AML compliance is an ongoing commitment that requires continuous dedication from senior management and staff alike.

As conveyancing firms take notice of the striking headline, there are practical steps they can take to strengthen their AML compliance framework to fortify their position:

  1. Board-Level Oversight: Ensure that AML compliance receives regular attention and scrutiny at the highest levels of the firm. Board members should be actively engaged in monitoring compliance efforts and addressing any deficiencies promptly.
  • Due Diligence: Review and strengthen due diligence processes for client onboarding and transaction monitoring alongside regulatory guidance which is ever evolving. Regularly review and update these policies to reflect changes in regulations, industry best practices, and emerging threats. The Legal Sector Affinity Group Guidance remains the definitive guidance for the legal sector and should be the starting point when mapping out the firm’s AML strategy.
  • Ongoing Training and Awareness: Provide comprehensive training programs to educate staff about AML regulations, risks, and best practices. Foster a culture of compliance where all employees understand their responsibilities and remain vigilant against potential red flags.
  • Continuous Monitoring and Review: Establish mechanisms for ongoing monitoring and review of AML controls and processes. Conduct regular audits and assessments to identify areas for improvement and ensure compliance with regulatory requirements.

By prioritising AML compliance and implementing these proactive measures, conveyancing firms can mitigate the risk of regulatory breaches, safeguard their reputation, and uphold the highest standards of integrity and professionalism in the provision of legal services.