sradent

Putting a dent in.


Dentons has successfully batted away the SRA’s accusations that it breached compliance regulations when it onboarded a client, in a defeat for the regulator which has left it facing a hefty costs bill.

The SRA claimed that when Dentons merged with Salans in 2013 and inherited ‘Client A’, the former chairman of a bank in a corrupt ex-Soviet state, it failed to carry out the appropriate checks on his source of wealth.

In the end Dentons dumped Client A when he was jailed for embezzling billions through his bank.

Part of the SRA’s case relied on the candid remarks of former Salans chairman Francois Chateau, who is now safely tucked far away in Dentons’ New York office.

When a member of Dentons' risk and compliance team flagged concerns over Client A's plans to buy a bank in the UK, Chateau called the risk-averse lackey “untrustworthy” and a “big prick showing a poor judgement and not knowing what he is doing”.

Interviewed as part of the SRA’s probe into the matter in 2020, he also spelt out to investigators that asking a client about their financial situation was "not in European culture" and “impolite”.

The SRA said Chateau’s approach to due diligence was the “exact opposite” of what was required, but its case was challenged by Dentons on the basis that the regulator was mistakenly applying current compliance standards to a period when those rules didn’t yet exist.

Sources within Dentons expressed surprise (and some amusement) that the SRA appeared to the firm to have been unaware of the existence of the SRA's own, less onerous guidance which were extant at the relevant time.

One insider told RollOnFriday that an SRA investigator only became aware of the old guidance’s existence as a result of exchanges with Dentons in the run-up to the tribunal. 

A source at the SRA objected to that characterisation, telling ROF that the task of the particular forensic investigator in question had only been to divine the actions Dentons had taken and whether the government's regulations had been breached, not to know what guidance may have been applicable at the time.

The tribunal’s conclusion was equally messy, with Dentons and the SRA each claiming vindication after the SDT made a mess of its findings.

Initially the tribunal found that a single allegation was proven, ruling that between 2013 and 2017 the firm failed to take adequate measures to establish the source of Client A’s wealth and/or funds in breach of the Money Laundering Regulations 2007.

But after Dentons objected that the lone allegation was dependent on the others being proven, and that they had all been dismissed, the tribunal threw that one out as well, determining that while there had been a 'technical' breach, it did not amount to misconduct.

A spokesperson for the SDT told ROF, “The Tribunal found that there was a breach of the Money Laundering Regulations [a win for the SRA, then], but that the breach did not amount to professional misconduct [scratch that, it's a win for Dentons]. The Tribunal has no jurisdiction to sanction for that matter [yep, a win for Dentons]. So whilst technically Dentons were found to have breached the regulations [ROF retracts that, it's a win for the SRA], the allegations of professional misconduct were dismissed [sorry, no, it'a definitely a win for Dentons].” So that’s cleared that up, then.

In a statement, Dentons said, "We welcome the SDT’s finding that the SRA's case is dismissed. There has been no breach of the SRA Principles and therefore no sanction against Dentons". 

"It was accepted throughout the case that Dentons at the time had ‘gold standard’ AML systems and processes", said the firm. 

"Notwithstanding this, we recognise that risk management and regulatory compliance requires constant vigilance and attention and, since the period in question, we have significantly enhanced our capabilities and procedures. We remain committed to upholding the highest standards of professional conduct and have co-operated with the SRA throughout its investigation."

An SRA spokesperson said, “We will await the SDT’s written judgment before deciding on any steps”. No costs order was made, meaning the SRA also has to pick up the bill for its own costs which, reflecting the years-long investigation, amounted to £189,000 including VAT.


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Comments

Anonymous 15 March 24 08:58

I'm glad this one is back again this week, can we get a return of the 'self-abuse lost us the Empire' dude in the comments please?

Parsnip 15 March 24 09:00

when we say "paid for by the SRA" we presumably mean "paid for by all solicitors through their PC fees". 

Anon 15 March 24 09:18

This was clearly not a case the SRA should have pursued.  There must have been better cases that they could have spent 200 grand prosecuting. 

Wish I knew... 15 March 24 09:22

What I don't understand is why the SRA seldom has to pay the winner's costs. They fought long and hard ti get the burden of proof lowered to the civil standard. Why not then face litigation risk if they get it wrong. It would create a check and balance in the system and discourage gung ho litigation. 

Also, £189k - why so cheap. They normally manage to get to at least £50k when the solicitor admits the breach, says sorry, and hands in their practice certificate early. 

Anonymouser 15 March 24 09:26

It’s ridiculous that the SRA can make such a cock-up and still a) have the temerity to ask for its costs and b) not have to pay the firm’s costs.  There’s absolutely no incentive for the SRA to act reasonably.

Scep Tick 15 March 24 09:44

What I don't understand is why the SRA seldom has to pay the winner's costs.

Cos they don't have a dog in the fight.  No prosecutor does.  It's always on behalf of a wider audience.  If prosecutors had to pay costs for unsuccessful prosecutions, then no prosecution would ever be brought.  Why take the risk of being out of pocket when, if you win, you get no personal benefit?

 

I think I'm more bemused as to how a breach of the law is not professional misconduct.  Looks like the SDT made a total horlicks of things.

Anonymous 15 March 24 09:48

This is what happens when you have 3 totally incompetent parties in a fight. LOL

Anonymous 15 March 24 09:54

"This was clearly not a case the SRA should have pursued.  There must have been better cases that they could have spent 200 grand prosecuting." - Ever since Beckwith they've been at a loss with what to do with themselves. 

What else are they supposed to do now that they can't fine you for finally cracking and saying yes to bonking your hot trainee after she has spent the last month incessantly reminding you that she broke up with her boyfriend and is so lonely now but really really doesn't want to go back on the apps because the guys on there are all so immature. Frankly, it's amazing that you held out for this long.

Anonymous 15 March 24 10:00

Dentons don't look incompetent to me. Looks like they played a blinder, handing the SRA an L and cowing the SDT into undoing its one negative finding.

Defund the SRA 15 March 24 12:43

The SRA wouldn’t roll over this easily if the case was about getting a trainee struck off instead

crust of bread 15 March 24 16:48

Agree with Defund. If this had been a trainee it would have been full stalinist show trial followed by a massive cost order and strike off. Interesting in this case the partner @ Dentons walked away unscathed. 

Anon 15 March 24 19:52

I wonder if the regulators of other professions are held in as low regard as the SRA. Is it even possible? 

Scep Tick 15 March 24 21:27

Can anyone point me to the myriad of cases re trainees before the SDT?  The only one I can think of is the one who lied about losing papers.

Also perhaps can someone tell me how a trainee can be struck off the Roll when they're not on it?

Anonymous 15 March 24 23:39

Scep Tick - the SRA are well known for going after trainees and junior lawyers over nothingness, and prohibiting them from practice. I don't think it's helpful trying to have a go at people over a term of art re striking off the roll vs prohibition from practice when they are effectively the same thing. I don't think it is anyone's job to educate you on the number of these cases - everyone who pays attention to the legal news over the last 10 years knows this to be true, and can easily evidence it via the LawGazette etc., but it is somewhat time consuming and, quite frankly, we don't need excuses or explanations as to why you are too lazy or stupid to be able to conduct the basic research yourself. 

Also you're a real beauty on the forums. People know who you are in real life. It is not surprising, I will say that much.

Anon 16 March 24 06:25

One of the issues with the SRA is that they have been late to the party on a lot of this stuff compared to other regulators. The likes of the FCA were streets ahead. It is the SRA’s supercilious approach to these matters that wind up the profession. They have overseen a number of catastrophic disasters as a regulator (Axiom etc) but never take responsibility for their own failures. Instead, they take on cases like this and try and prove a point relating to something that happened 10 years ago where it is pretty clear to the neutral observer that there is absolutely no public interest in taking on a case like this other than to get a big name on their kill sheet. The SRA would better align itself with the profession by actually providing constructive guidance that actually serves the public interest (ie by ensuring client money isn’t stolen and firms don’t go bust), rather than jumping on retrospective bandwagons. 

What a joke 16 March 24 08:17

Let’s seen how much the SRA will increase practising fees to cover yet another mistake.

Anon 17 March 24 08:21

More dawn raids on the horizon then, or perhaps just another exhorbitant increase in our annual fees. 

Anon 18 March 24 08:53

Dentons ‘get away’ with acting for client who has been imprisoned for embezzlement.  Not a great look.  

Tribunal find breach of ML Regs, then change their mind.  Not a great look. 

SRA fail in prosecution. Not a great look.  

No winners to be seen here. 

Anonymous 18 March 24 09:59

Scep Tick - the SRA are well known for going after trainees and junior lawyers over nothingness, and prohibiting them from practice. I don't think it's helpful trying to have a go at people over a term of art re striking off the roll vs prohibition from practice when they are effectively the same thing. I don't think it is anyone's job to educate you on the number of these cases - everyone who pays attention to the legal news over the last 10 years knows this to be true, and can easily evidence it via the LawGazette etc., but it is somewhat time consuming and, quite frankly, we don't need excuses or explanations as to why you are too lazy or stupid to be able to conduct the basic research yourself. Also you're a real beauty on the forums. People know who you are in real life. It is not surprising, I will say that much.

Scep Tick - the SRA are well known for going after trainees and junior lawyers over nothingness, and prohibiting them from practice. I don't think it's helpful trying to have a go at people over a term of art re striking off the roll vs prohibition from practice when they are effectively the same thing. I don't think it is anyone's job to educate you on the number of these cases - everyone who pays attention to the legal news over the last 10 years knows this to be true, and can easily evidence it via the LawGazette etc., but it is somewhat time consuming and, quite frankly, we don't need excuses or explanations as to why you are too lazy or stupid to be able to conduct the basic research yourself. Also you're a real beauty on the forums. People know who you are in real life. It is not surprising, I will say that much.

Scep Tick - the SRA are well known for going after trainees and junior lawyers over nothingness, and prohibiting them from practice. I don't think it's helpful trying to have a go at people over a term of art re striking off the roll vs prohibition from practice when they are effectively the same thing. I don't think it is anyone's job to educate you on the number of these cases - everyone who pays attention to the legal news over the last 10 years knows this to be true, and can easily evidence it via the LawGazette etc., but it is somewhat time consuming and, quite frankly, we don't need excuses or explanations as to why you are too lazy or stupid to be able to conduct the basic research yourself. Also you're a real beauty on the forums. People know who you are in real life. It is not surprising, I will say that much.

 

Sir Woke XR Remainer FBPE MBE 19 March 24 08:55

Describing being in New York as being “safely tucked away” from regulatory hassle is remarkable

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