A top law firm faced allegations that it broke UK money-laundering rules by being too polite to ask a politically connected banker from a former Soviet republic how he got his cash.
Dentons overrode an internal warning urging “extreme caution” in dealing with him as a client and failed to ask the banker where his wealth came from in case it might be “impertinent or impolite,” legal regulators had alleged at a London court. While the tribunal dismissed the case Monday, finding no breach of the industry watchdog’s principles, it did find proof of shortcomings regarding money-laundering rules.
The banker, who can’t be identified due to a court order, had spent tens of millions of pounds on London property and a family member is now the subject of a separate police probe. Dentons fought the case at the tribunal, arguing that it took “adequate measures” to establish the banker’s source of funds. Lawyers for the firm said it knew that the client held a “substantial shareholding” in a state-controlled bank.
“We recognize 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,” the firm said in a statement.
The regulator’s lawsuit is one of just a small number of cases scrutinizing the role of professional services in enabling the flow of illicit finance into Britain. Few cases go to trial in the UK despite the police estimating that hundreds of billions of pounds are laundered through the UK annually.
The banker became a client of Dentons in 2013 after an acquisition of a smaller firm, and was immediately identified as a “politically exposed person” — a term used to ascribe a higher level of risk and one that puts the onus on the firm to scrutinize transactions. But Dentons never asked the banker for his salary or the the size of his shareholding in the bank.
Dentons lawyer Francois Chateau, now based in New York, told the Solicitors Regulation Authority in an interview that he never asked the banker how much he earned.
“In Europe, in my culture, we don’t do that. You don’t ask err, how much do you make?” According to Chateau. He said he’d never asked anybody to show him their bank account and to give evidence of what they own that would be “visible for everybody to see.”
The regulator called Chateau’s answers “astonishing,” saying that he adopted an “extraordinarily credulous attitude towards individuals of apparently spectacular wealth.”
Dentons, which has offices throughout the world, said the regulator wasn’t targeting any individuals, saying it had accepted that “no one at the firm committed any rule breach, or at least none serious enough to warrant prosecution.”
It said Chateau knew the banker “was a wealthy man who was very successful in finance, that he was known for being opposed to corruption and that he was extremely well connected.” A spokesman declined to comment on Chateau.
Dentons persisted with keeping the banker as a client even after the firm’s general counsel said in 2014 that it shouldn’t continue working for him.
Dentons’ lawyers said even if the firm had breached money-laundering rules then its conduct wasn’t sufficiently serious to merit any kind of penalty.
The regulator will await a written judgment before deciding on any steps, a spokesman said.
