London firm Howard Kennedy has been fined £35,000 for failing to do enough to prevent one of its solicitors providing a client with a banking facility.
The Solicitors Disciplinary Tribunal today confirmed that it had sanctioned the firm and a former partner Christopher Langford, who admitted to facilitating payments and was fined £15,000.
The tribunal heard the firm’s compliance officer submitted a material breach report in 2015 in which, amongst other things, it was reported the client account had been used as a bank account in relation to substantial payments made on behalf of a client.
Langford, a who retired in 2011 and later worked as a consultant at Howard Kennedy, admitted facilitating payments in and out of the client account which were unrelated to any underlying legal transaction.
On one ledger, the client account was credited with around £4.2m between October 2010 and April 2012, with payments of around £3.5m debited against the same ledger. Many of the payments were authorised by Langford, 72 this year, and none related to the professional work of a solicitor.
The tribunal heard Langford continued to facilitate payments even after he was warned in 2012 that the practice needed to cease.
Howard Kennedy admitted that payments came in and out of its client account, and admitted failing to put in place any adequate measures to prevent it being used as a banking facility.
The Solicitors Regulation Authority, prosecuting, said the firm had known about the misconduct in 2012 but not reported it for almost three years, but Howard Kennedy submitted it had not been proved that the firm ought to have known the matter was so serious. The tribunal dismissed an allegation that Howard Kennedy had committed a serious breach of account rules by not reporting the matter promptly.
In mitigation, Langford said the rules were created to prevent the risk of money laundering, but this had not materialised here and there was no suggestion of any loss to clients. The client had undergone all necessary due diligence checks and did not believe he was in breach of the rules before April 2012. After that point, he accepted his conduct lacked integrity, but said this stemmed from his wish to maintain convenience for his client.
The firm said it had enhanced due diligence and written to all partners asking them to review client matters for any potential rule breaches.
The tribunal said Howard Kennedy caused ‘foreseeable harm’ to the reputation of the profession, and its inaction caused breaches to be repeated over several years.
The judgment added: ‘The firm was aware of [Langford’s] misconduct, but failed to ensure that it did not continue. It had not informed any of its authorising partners of the misconduct, nor did it put systems in place to prevent further misconduct until much later. This was a serious failing.’
No orders were made in relation to three other members of the firm, Eric Gummers, Paul Amandini and Mark Johnstone.
The firm said in a statement: 'It is important to stress that we self-reported, and the judgment highlighted that we provided our full co-operation to the SRA in relation to the investigation. We would like to emphasise that the tribunal noted that there had been no loss to the client, that the client had made no complaint, and that all of the payments made were legitimate. There was no suggestion of any misappropriation or misapplication of client money.
We are pleased that the Tribunal dismissed one of the allegations against the firm, relating to the issue as to whether the firm should have reported the subject matter of these proceedings before it did so in 2015.
'We take our compliance responsibilities very seriously and have a wide range of procedures to ensure that our practising solicitors abide by their professional duties. Since 2015, we have reviewed our internal procedures and now have a five strong risk team led by our director of risk & compliance with policies and personnel in place to monitor firm-wide compliance.'