Court of Appeal rules for SRA in Dentons money laundering case

The court battle between the Solicitors Regulation Authority and global practice Dentons over allegations of historical money laundering breaches could return to the Solicitors Disciplinary Tribunal following a Court of Appeal ruling today. In Dentons UK and Middle East v Solicitors Regulation Authority, three judges today upheld the High Court's quashing of a Solicitors Disciplinary Tribunal decision to dismiss charges of a breach of SRA principle 7. 

However the Court of Appeal judges allowed the firm's appeal against the High Court's decision to remit for rehearing allegations of breaches of two further principles. They also agreed with the SDT that 'there is an inherent requirement of seriousness' in considering whether a solicitor's conduct amounts to a breach of SRA principles or the Code of Conduct. 

The alleged money laundering breaches concerned an individual identified as 'Client A', whom the Gazette understands to be Jahangir Hajiyev, a former chair of the International Bank of Azerbaijan. He had been a client of Paris-based Salans LLP, the London office of which was acquired by Dentons in 2013. Dentons initially identified Client A as a politically exposed person and a high risk for money laundering. However following objections from a former Salans partner, Dentons went on to act for the client in 38 matters, including the purchase of an £8m UK property.  

In 2016 the client was sentenced to 15 years' imprisonment for crimes including embezzlement. Two years later his wife was subjected to a High Court unexplained wealth order. 

The SRA charged that, between 2013 and 2017, the firm failed to take adequate measures to establish the source of Client A's wealth and/or funds, thus breaching the Money Laundering Regulations 2007 and the Code of Conduct. Following a six-day hearing, the SDT dismissed all allegations and directed the SRA to shoulder its own costs, later revealed to amount to £189,000.

Ruling on an appeal by the SRA, the High Court last year found that, although the firm’s breach had been ‘inadvertent and committed in good faith’, this ‘did not justify’ the dismissal of the allegation. The High Court also found the SRA was entitled to ‘reasonable costs’. It remitted the case to a fresh SDT panel for reconsideration.

Dentons appealed to the Court of Appeal on four grounds: that the judge had been wrong to conclude that the SDT's finding that the breach was not 'serious, reprehensible or culpable' did not justify the decision to dismiss the allegation; the judge had been wrong to quash the whole of the tribunal's decision; had been wrong to remit to a new panel allegations concerning principles 6 and 8;and had been wrong to make a costs order against the firm. 

In a two-day hearing last month, Dentons told the CoA that protecting the public and maintaining confidence in the profession does not require every breach of rule or regulation, whether serious or not, to be treated as misconduct. Meanwhile the SRA defended a zero-tolerance approach, stating that professional conduct rules do not contain a requirement of ‘seriousness, culpability and reprehensible conduct’. 

In a 36-page judgment handed down today, Lord Justice Bean, Lord Justice Zacaroli and Lord Justice Jeremy Baker state that an allegation of a breach can only be upheld if the conduct 'is sufficiently serious'.

However, noting that the SDT found that relevant source-of-funds questions had not been asked of Client A, the appeal judges had 'difficulty in understanding why this entitled the SDT to characterise the breach of the MLRs by the firm as being "entirely inadvertent".