Clydes has vowed to get to grips with the AML regs.
Clyde & Co has been fined £500,000 after the firm and its former star shipping partner admitted breaching anti-money laundering regulations.
Ed Mills-Webb, who was Chair of the Marine Global Practice Group when the firm suspended him in 2019, was fined £11,900.
The fine represents the joint-equal highest issued by the SDT, matching Locke Lord's penalty in November 2017 for failing to properly supervise a partner who was involved in potentially dubious investment schemes.
When Mills-Webb quit, four other shipping partners resigned in solidarity and founded Preston Turnbull, where he is currently a consultant.
This week he and his old firm agreed a statement of facts and admissions with the SRA following their referral to the SDT which revealed how their assumptions that adequate client identity checks had been carried out paved the way for a regulatory smackdown.
The SRA had alleged that between 2014 and 2019, Clydes and Mills-Webb failed, adequately or at all, to conduct due diligence or to conduct ongoing monitoring of a shipping client identified as ‘Company A’, and had failed to cease transactions or terminate the relationship with the client despite the omissions.
In their statement of agreed facts and admissions, Clydes and Mills-Webb accepted that they had committed breaches of anti-money laundering regulations and principles of the solicitors' Code of Conduct.
Company A was onboarded by Clydes before Mills-Webb became involved in its matters, but in 2014 it asked him if Clyde & Co could hold money (lots of money) as an escrow agent in respect of various ship purchases.
Different companies, referred to as ‘Principals’, were to be used by Company A to buy and sell the vessels, and were to have access to the escrow account.
Mills-Webb expected that Clyde & Co’s risk and business acceptance teams were aware that Principals, rather than Company A, would be used to purchase the ships, as it was a common practice in the shipping industry, but both parties conceded that they failed to adequately identify the Principals in question.
On one occasion Mills-Webb informed the firm’s Business Acceptance Unit that a particular Principal being used by Company A wished to keep the identity of its shareholders confidential, which he and Clydes admitted should have rung alarm bells as to the necessity of “punctilious” customer due diligence, which was not carried out.
The due diligence collected on Company A was six years old, while another transaction saw Company A using a Principal incorporated in Liberia. Although the jurisdiction was commonly used to ‘flag’ vessels, Mills-Webb accepted that he should have considered whether the use of an entity located in Liberia heightened the risk of money laundering.
When it became apparent that money for one transaction was being provided by a Principal and not Company A, Mills-Webb’s team checked with ‘Person A’ that he was its ultimate beneficial owner, but did not seek any documents to substantiate the claim. Mills-Webb had understood from his team that Clyde & Co's Business Acceptance Unit had told them that documentary proof wasn’t necessary, but accepted he should have done more to check the position.
The firm had also agreed with Mills-Webb that it would carry out periodic checks into Company A and Person A, but it did not do so in relation to several transactions.
Because of failures in the client onboarding process, escrow monies were paid into Clyde & Co’s client account by Principals who were not identified as clients or third-party payers. The SRA’s case focused on six transactions, but they formed part of a larger spread of 30 transactions involving Company A which saw just under $50 million passing through Clyde & Co's account.
Although the SRA said it had no evidence that Company A, the Principals, or Person A were in fact involved in money laundering or financial crime, the transactions “carried risks of both, and the fact that inadequate [customer due diligence] was carried out in this instance meant that such a risk was not properly addressed. As such the risk of money laundering cannot be ruled out".
Clyde & Co received a base level fine of only £50k which was uplifted to £500k to reflect its turnover, and it must also pay £128k of the SRA’s costs. Mills-Webb was ordered to also pay costs of £55k.
It is the second time that Clydes has been fined for money laundering failures. In 2017 three of its partners were ordered to pay £10,000 each, and the firm £50,000.
It was the SDT's biggest ever fine at the time, after which Clydes said that it had "reviewed and strengthened a number of aspects of our approach to risk management" so that "the circumstances which led to these breaches could not happen again".
This time it really means it. In a statement the firm told ROF, “Clyde & Co sincerely regrets any compliance failings - relating to a series of client shipping transactions that we identified in 2018 - which led to this hearing. Having reported the issue to the SRA, we fully assisted with its investigation and have sought to learn appropriate lessons.”
“Under the firm’s current leadership, we have significantly enhanced our risk management and regulatory compliance capabilities including restructuring our in-house risk and legal functions; appointing a Head of Financial Crime; and further enhancing our processes, policies, levels of oversight and training.”
“We hold ourselves to the highest professional and ethical standards and take responsibility for ensuring we meet them. This SDT determination is a reminder that regulatory compliance and risk management requires continuous, diligent attention. Our senior management is fully committed to ensuring firm-wide adherence.”
Mills-Webb did not respond to a request for comment.
The SRA previously fined Mishcon de Reya £232,500 in January 2022 for money laundering failures, and Ashfords £100k in December.
Paul Philip, SRA Chief Executive, said, “Money laundering is not a victimless crime and firms have a key part to play in preventing legal services from being used by criminals. Firms must ensure they are playing proper attention to identifying clients and mitigating money laundering risks".
“This fine should be a wake-up call to any firms that are not meeting their responsibilities to have robust AML processes in place, otherwise they could be facing a similar penalty”, he said.
Comments
60
0
Don’t worry though as Clyde’s has managed to save the £500,000 profit by serving notice on 14 EP’s in insurance this week. 10 Legacy BLM and 4 Legacy Clyde’s. Merger going well.
46
1
But no notices for those who drove BLM into the hands of Clyde’s. It’s all very predictable.
52
0
The irony is that Clyde’s actually have a big team advising other firms about matters of professional misconduct. All the while, their own house is not in order. Allowing your firm to be used for such obviously dodgy offshore “money moving” in return for the big fees they got for turning the collective blind eye, is shocking.
22
1
That’s what you get for laundering ‘anti money’…
36
0
If you actually look at the detail of what Clyde’s did - it’s like mafia lawyer behaviour and appalling. Facilitating and enabling money moving between these various offshore jurisdictions and unknown companies for a cut of the cash. They are very lucky they have mates at the SRA and the politics led to an agreed sanction. They must have called in some favours to get off so lightly.
20
0
GC won't be happy
29
0
I joined a podcast not so long ago where a team of professional misconduct lawyers lead by Mr C lectured about risk and compliance issues for law firms with a big focus on money laundering and how to spot it. Yes, they were from Clyde & Co.
28
0
Whilst there appears to have been issue, I would like to know where the fine is actually spent/allocated? Could some of this money not go towards the Plexus mess?
20
1
What a mess!
22
0
Clydes surely know how to spot money laundering no matter how much they protest when caught red handed that it was all innocent oversight!
33
1
Mass redundancies for legacy BLM staff? It’s gonna happen isn’t it? We are not soft.
31
0
The merger/buy out was never going to work well for BLM staff. Its is a sad day for BLM but it was coming to those EP/SPs who failed to match Clyde's biz requirements. Some BLM EPs/SPs who were shielded for yrs suddenly began to feel vulnerable. Imaging having to earn your keep and do at least 6hrs+ chargeable work each day as opposed to simply walking around the office looking busy or upsetting staff. The departures will free up a few desks in Manchester so better options for the desks with a proper view etc
25
0
@Tut tut 09:20 - do you know something the SRA doesn't?
ROF report"the SRA said it had no evidence that Company A, the Principals, or Person A were in fact involved in money laundering or financial crime" . This came after a five year investigation. But you claim it was "obviously dodgy offshore money moving" ?
29
0
Imagine if a trainee had been caught red handed in equally bad conduct. SRA would have sent them off to the gulag! No cushy “agreed outcome” unless you are a senior partner at an establishment firm…
20
2
New Bailey... new reality - so right. In any merger of the "bacon and eggs" type, one partner is always going to get it easier than the other.... otherwise there would never have been a need for a merger.
20
1
"Imaging having to earn your keep and do at least 6hrs+ chargeable work each day"
I've been trying for almost an hour now. Can't do it.
23
0
GC at 1224, it screams money laundering if you read the facts. The fact that cannot be “proved” is not the issue. Fraud hides itself. The offence is facilitating and not doing the proper checks and helping in the cover up. It’s mob lawyer behaviour.
22
1
Strongly agree with Anon 11.09. If someone turns up to buy a house with a suitcase of cash and it is accepted by those involved in the sale without checks, then that is the misconduct. The fact the source of cash may be legitimate is not a defence to turning the blind eye.
In this case, the cash was then sent offshore through a group of special purpose companies in tax haven jurisdictions by entities Clyde’s had not even vetted. It was an obvious dodgy scheme.
18
0
agree with anon at 11:09. so SRA had “no evidence” …. well well - it’s almost as if sophisticated criminals who use city law firms endeavour to ensure that there isn’t any evidence FFS! regardless of the lack of the evidence the proven (admitted?) actions (or inactions) surely merit a much heavier punishment? or are we giving up on making a real impact on the flow of criminal money through solicitors?
31
1
Agree that checks must be made and that's exactly why Clydes were fined, but I think you'll find that almost every cargo ship in the world is flagged in and is owed by a company incorporated in one of Liberia, Nevis, St Kitts, Panama, Marshall Islands etc, 99.99% of which is entirely legitimate. It is definitely too far a bow to draw that just because a company is based offshore that it is involved in money laundering and criminal activity. Yes, Clydes should have done better checks and yes, that is because of the risk of money laundering, but it's not an "obviously dodgy scheme" by default.
Remember that all of this went through many hands at Clydes and it was their cumulative failings which resulted in them getting done by the SDT. It seems to me that Clydes' systems were poor and had remained poor even after their last record fine by the SDT and that is why they got rammed with the massive fine and the former partner got off relatively lightly.
23
0
@first comment, any info on why Clydes are giving these EPs their notices? Are they simply not bringing enough work in? Seems strange to scale down like that when the whole point of the merger was economies of scale.
18
1
Is it really a massive fine? Second offence. Approx £1k per partner.
20
0
lock them all up for CLEAR AND OBVIOUS* money laundering.
*I don't know anything about this case other than whats reported in the press, but its clear and obvious to me.
27
1
@13:21 primarily because of profitability. Margin erosion is an issue across the insurance sector. Some inherited from BLM are unprofitable whilst others like in Scotland duplicate roles filled elsewhere. Some are not performing. The PEP is under pressure and the merger was motivated by work not people. There are too many partners across Casualty Europe. This is just the first tier of restructuring.
17
1
yes everyone knows lots of ships are flagged in Liberia but in this case we’re talking about a corporate entity registered in liberia providing money without any due dil. no one said clear and obvious money laundering but Clyde’s omissions are of the nature which would facilitate money laundering if the unscrutinised underlying transactions involve dirty money. Clyde’s know that and that compounds the offence so my view is that a slap in the wrist insufficient - if we want to have an impact on dirty money flow through City firms.
21
0
The Vivienne, any idea which offices were affected by the cull? I’m guessing Manchester and London? I fear that the axe will hit Legal Directors down to Paralegals next. Even admin.
15
0
Anon 12:43 is on point that in shipping Liberian companies are normal. Confidential beneficial owners, however, are not.
18
1
@The Vivienne 14:18
...any particular reason one should assume that the partner in Scotland allegedly duplicating the role of someone based elsewhere should go as opposed to the other way around?
Also... any goss on who in Scotland is getting the boot? Asking for a friend...
17
0
I appreciate that the money laundering issues are more serious in some respects, but this was also as serious breach as you could get of the SRA / FCA rules that have prohibited (for a long term) the provision of banking facilities (which providing these escrow facilities would have done, unless provided by a 3rd party escrow agent, which this wasn't) by an entity that wasn't FCA regulated.
18
0
To be fair to em, they identified the issue and self-reported.
One wonders whether other 'top firms' are as candid with the SRA about their regulatory woopsies.
30
0
There are not many legacy BLM administrative staff left. The remainder now are just waiting for redundancy notices. This may come as something of a relief in some quarters. Sadly a bullying culture exercised by some, unqualified for their role, support "managers" at BLM has been allowed to continue unchecked at Clydes adding to the misery.
23
0
Another publication (shall we call it “The L”) has run stories about the partner exodus from BLM/Clyde & Co. The numbers are horrific. The merger is an obvious failure. But RoF will not report it. Clydes spent £20m on a turkey. Surely that is worth investigating and commenting on?
26
1
This is bizarre. I flagged to ROF the redundancies (in costs teams) before Christmas. No comment made by ROF or any reporting on that. Now notices to EPs, but still no reporting.
19
0
@20:48
The merger is not necessarily a failure for clydes if old blm partners have left. They’ve taken out a competitor, nabbed their clients and now have a “full offering” to insurer clients to do the high end stuff in London and the volume stuff in the regions.
19
0
Clydes & ƁLM merger was about securing panel appointments. Insurers want a reduced panel and within the next few years there will be 5-10 large firms for insurers that offer a full service.
18
0
At least the SRA did something following this self report by C&C. That’s more than they did when Plexus self reported obvious misconduct by a group of Partners back in early 2019. The SRA ignored that misconduct and let them all carry on within our Profession. And we know how that ended up.
18
0
Stealth redundancies and panels squeezing rates. Clyde's is on the way down and out, sorry to say.
13
1
I guess someone has to pay for Axiom Ince
17
1
Are C&Co actually any better in the regions than others? Or even in London?! There is so much movement by employees between firms that it seems clients are simply paying for the brand at this stage. The knowledge and skill is an absolute lottery, and often not even very good in Clydes in more recent years. The named partners are rarely the ones doing the work, and when they are they're not over the detail
15
0
Someone has to pay for Axiom Ince
16
0
And now those panel appointments have been secured it’s time to say goodbye to those who helped to secure them.
Bye bye baby…..
9
1
Replying to Anonymous 12 January 24 15:59
I do hope someone will let all of the conveyancers know that they are routinely in SERIOUS BREACH of the FCA rules.
15
0
Reply @The Vivienne 12 January 24 08:46
Don’t worry though as Clyde’s has managed to save the £500,000 profit by serving notice on 14 EP’s in insurance this week. 10 Legacy BLM and 4 Legacy Clyde’s. Merger going well.
We're all waiting to see who is next .. dreadful "merge" - barely any BLM staff left at C&C - lots of v v unhappy staff
10
1
Only the BLM cockroaches will survive.