The solicitors’ regulator has suffered a major setback after its prosecution of the world’s biggest firm by headcount effectively failed.

Following a six-day hearing at the Solicitors Disciplinary Tribunal, the panel dismissed all allegations against Dentons and directed the Solicitors Regulation Authority to shoulder its own costs. The SRA has since revealed its costs came to £189,000 inclusive of disbursements and VAT.

In its prosecution, the SRA alleged that the firm had breached money laundering regulations through its retention of a client from 2013 to 2017. The client, who by an order of the tribunal cannot be identified, had been chairman of a bank owned by a former Soviet state with a poor record for corruption and transparency.

The SRA sought to argue that Dentons made insufficient checks on the client’s source of wealth and funds, while the firm insisted that the regulator was not basing its prosecution on money laundering regulations that were in place at the time.

The tribunal deliberated at the end of the week and returned on Monday morning to say that one allegation relating to checks on the client’s source of wealth had been found proved, while the rest were not proved. After an intervention from Dentons to say that this allegation was dependent on the others and there was no jurisdiction to find it proved, the tribunal came back an hour later and dismissed the one remaining allegation.

The tribunal had already stated that the one allegation found proved and later dismissed was not so severe as to require any sanction.

The SRA then sought to argue that Dentons should be ordered to pay a contribution towards its costs, saying that the case was properly brought and an ‘important yardstick’ for the regulator and the profession.

Dentons submitted that the SRA had not taken into account its own guidance from the time of the alleged misconduct and had made no criticism of the firm’s systems and controls.

Despite both sides being asked to make submissions on costs, at no point during the hearing was it explained what the SRA’s costs were. The tribunal made no order, meaning the SRA has to pay its costs in full. A full judgment with the SDT’s reasoning will be published in around seven weeks.

Following the hearing, 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. 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.’

It is open to the SRA to appeal. A spokesperson said: 'We will await the SDT’s written judgment before deciding on any steps.'