Clyde & Co fined £500k after admitting due diligence failure

Top-50 firm Clyde & Co has been fined half a million pounds after admitting failing to carry out due diligence on a corporate client for more than four years.

The firm’s former partner Edward Henry Mills-Webb was also fined £11,900 by the Solicitors Disciplinary Tribunal after admitting that he ‘materially contributed’ to the failure to check more than a dozen transactions as required by anti-money laundering regulations. There was no evidence that the client or its principals were involved in money laundering or financial crime.

It is the second sanction levied on Clyde & Co in the past seven years. The international firm was previously fined £50,000 and three partners £10,000 each for accounting failures and breaches of AML rules.

The tribunal heard earlier this week that both Clyde and Mills-Webb admitted that they should have obtained more complete documents for the former client, a shipping company incorporated in Liberia. The only documents obtained when the client was taken on in 2014 were six years old, and the firm and Mills-Webb accepted that they should have done more to understand the nature and structure of the business.

In mitigation pleadings, which spanned the whole of Tuesday afternoon and all day Wednesday, the firm said it had conducted some due diligence on the company, but not enough.

Clyde blamed Mills-Webb for failing to identify what due diligence was required when the client was taken on and for failing to pay attention to emails from the firm’s business acceptance unit about steps that needed to be taken.

For Clyde, Ben Hubble KC said: ‘The firm apologises for and very much regrets its failings. The firm has acknowledged the need to, and has worked to, strengthen its systems and processes.’ Matter opening forms must now be signed off by the relevant fee-earner, who must expressly confirm that the information on the form is correct. Clyde said it had also increased the level of scrutiny that it applies to work classed as high risk.

Helen Evans KC, for shipping expert Mills-Webb, said her client had not been ‘acting blindly and in a vacuum’ and believed his team had checked the client’s status.

Mills-Webb accepted he had been ‘too detached’ from the due diligence process but stressed that his misconduct was an error and inadvertent, she said. Evans added: ‘He has done nothing inappropriate and always submitted there should be shared responsibility.’

She said it was ‘unfair’ that the focus of the SRA investigation had been on him and submitted that the four-year delay in bringing proceedings before the tribunal had caused stress and worry.

The tribunal ordered that, as well as the £500,000 fine, the firm pay costs of more than £128,197.48p – around 70% of the SRA’s costs. Mills-Webb was ordered to contribute to costs in the sum of £54,941.77. Full reasons will be published in around seven weeks.

In a statement, the firm said it ‘sincerely regrets any compliance failings’ which it identified in 2018. It said: ‘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. 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.’

Article Credit: https://www.lawgazette.co.uk/news/clyde-fined-500000-after-admitting-due-diligence-failure/5118383.article