SRA’s Prosecution of Dentons: A setback for the SRA and Industry Reaction

SRA and Dentons UK and Middle East LLP

In an important decision for the industry, the Solicitors Disciplinary Tribunal (SDT) dismissed all allegations against Dentons, one of the world’s largest law firms. The case concerned allegations of breaching anti-money laundering (AML) regulations. How has the industry responded?

The Allegations and the Hearing

The SRA alleged that Dentons had breached AML regulations whilst acting for a client between 2013 and 2017. The client’s identify remains confidential by order of the tribunal. They were acquired via a legacy firm and were a politically exposed person. They had served as chairman of a bank owned by a former Soviet state with a questionable history in corruption and transparency. The SRA contended that Dentons failed to carry out adequate provenance enquiries into wealth and source of funds.

The particular allegations were that Dentons had failed to:

(i) Comply with its legal and regulatory obligations.

(ii) Run the business effectively in accordance with proper governance and sound financial and risk management principles.

(iii) Maintain the trust the public places in the firm and in the provision of legal services.

Dentons responded by arguing that the SRA’s prosecution was not founded on the AML regulations in force at the time. The firm maintained they had used “gold standard” AML processes and accused the SRA of taking a revisionist approach. Significantly, Dentons did not ask the tribunal to approve the measures in place at the time as appropriate in 2024.

The matter was contested at the SDT over six days and all but one allegation was dismissed.

The Tribunal’s Verdict

Checks on Source of Wealth: In the first instance, the tribunal found one specific allegation proved. It related to checks on the client’s source of wealth. However, it decided the contravention did not justify a sanction.

Dismissal of Remaining Allegations: Dentons intervened, arguing that the allegations were tightly interdependent and dismissal of the proven allegation should follow. The tribunal reconsidered the proven allegation and dismissed it.

Appeal: The SRA await the full judgement and will consider their position on appeal.

Industry Reaction

The legal industry kept a close eye on proceedings because of the obvious implications in terms of risk management.

Relief for Dentons: Dentons were clearly relieved at the outcome. The firm emerged without sanction and, in effect, an endorsement of the procedures in place during the relevant period. Dentons expressed confidence in its commitment to compliance with the SRA’s AML requirements.

Constant Vigilance: The episode underlined the need for regular review and vigilance when it comes to compliance with the SRA’s AML framework.

SRA’s Costs: Significantly, the SDT directed the SRA to bear its own costs, in the sum of £189,000. This was despite submissions from the SRA that Dentons should make a contribution.

Industry Reflection: The case will have caused other law firms to review their AML procedures, no matter how robust they regard their practices. The SRA will want to prove a point in light of this defeat at the SDT. The decision underlines the fact that monitoring any changes in AML requirements is fundamental in avoiding the three allegations levelled at Dentons.

Conclusion

The dismissal highlights the need for accuracy, rigour and processes geared around change. Dentons will be very pleased with the result, but the industry must re-commit to compliance. We look forward to the full judgement in the hope of gaining further insight and guidance.