Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1. Bank and MLRO fined for SMR and AML failings
Bangladesh’s largest bank was hit with a multi-million pound fine this week for serious AML failures at its UK arm.
The Financial Conduct Authority (FCA) demonstrated to the industry their refusal to accept weaknesses in AML policies, state-owned institution Sonali Bank was fined £3.3m and prevented from accepting new deposits for five and a half months, a rare enforcement act to be implemented by the regulator. The bank’s money laundering reporting officer (MLRO) Steven Smith has also received a penalty of £17,900.
The FCA released a statement that claimed they found “serious and systemic weaknesses [that] affected almost all levels of its AML control and governance structure.” The Bangladeshi bank had previously received clear warnings about these shortcomings, which persisted from 2010 to 2014, and failed to follow the recommended steps provided by the FCA.
This case highlights the importance to all financial institutions of maintaining oversight of all branches and ensuring systems and controls follow requirements sufficiently. The FCA further argued that they have set well-defined obligations to abide by when it comes to AML policies and procedures and therefore expect all regulated firms to be effective in enforcing these.
Amongst the consequences of these failings are the penalties faced by Sonali Bank’s MLRO Steven Smith. Smith will receive not only a £17,900 fine, but has also been restricted from taking on another MLRO role or further performing any compliance oversight functions. Although the regulator has revealed that Smith was ‘unsupported and overworked’, the FCA’s emphasis on the accountability of senior managers stipulates that the numerous failures to escalate and report concerns in areas for which he was responsible is his personal wrongdoing.
Combating money laundering is a significant objective for the FCA and they intend to crackdown on any institution who fails to comply with the requirements. With senior management accountability measures in full force, there lies serious reason to ensure that financial crime compliance is met and any weaknesses swiftly identified.
2. Lloyd’s Banking Group cuts panel
Lloyds Banking Group has finalised its UK legal panel review, cutting core panel firms from ten to eight with DLA Piper and Norton Rose Fulbright losing their places on the roster.
Led by Group general counsel Kate Cheetham, existing panel firms CMS Cameron McKenna, Eversheds, Herbert Smith Freehills, Hogan Lovells, Linklaters, Allen & Overy, Ashurst and Addleshaw Goddard have retained their places on the bank’s panel.
As a Lloyds spokesperson said: “Following a rigorous and competitive tender process, we have finalised the list of the group’s legal core panel. The panel will include eight firms which have been designated ‘core’ as they are able to offer either alternative resourcing options, technology solutions and/or the ability to offer a wide range of complex legal advice.”
Legal Business revealed in February that Lloyds was planning to review its core advisers, with the expectation that the panel would reduce in size.The bank last conducted a full panel review in August 2014, and is expected to unveil its 16 UK sub-panels later this year.
A ‘robust’ tender according to partners familiar with the process, there was a strong focus by the bank on pricing via hourly rate as firm’s submitted quotes via reverse auction.
This follows widespread legal restructuring at Barclays, who reduced the total amount of law firms it worked with by 60% in July. In a more holistic approach to the tendering process, law firms were assessed on their ability to collaborate and innovate with an overarching goal to cut costs for Barclays.
In the face of harsh cost cutting measures, with Lloyds revealing another 1,340 job losses this week under its restructuring programme, it has never been more critical for tendering firms to be flexible on pricing, resources and delivery of service through technology.
With regulatory uncertainty surrounding Brexit and ring-fencing reforms assuring the bank’s need for high-quality external legal advice, what has been made clear from the panel reviews conducted at Lloyds and Barclays is that legal expertise is now considered by clients as a given, and not enough alone to justify inclusion on their panel.
As such, the challenge on law firms is now to adapt and better articulate how they provide value to clients through their services – whether this be through fixed pricing, technological solutions or flexible resourcing.
Movers & Shakers of the week:
Eversheds duo in line for key management roles
Keith Froud is set to be appointed managing partner, whilst Ian Gray is stepping into a leadership role relating to clients in ‘tripartite leadership’ under new chief executive Lee Ranson
New London managing partner appointed at Morgan Lewis & Bockius
Frances Murphy appointed as new London managing partner replacing Peter Sharp
White & Case boosts regulatory offering with hire from BNY Mellon
James Greig, EMEA Regulatory Counsel and Head of the Office of Public Policy and Regulatory Affairs at BNY Mellon joins White & Case in London
Winston & Strawn hires Middle East M&A heavyweight from White & Case
Campbell Steedman joins Winston & Strawn to head Middle East office
Simmons & Simmons strengthens real estate practice with hire from DLA
Richard Hopkinson-Woolley joins Simmons & Simmons real estate team in London
CC’s global co-head of banking joins White & Case
Patrick Sarch, global banking co-head at Clifford Chance has joined White & Case in London
Sherman Brussels competition partner quits to launch boutique after Quinn talks
Trevor Soames has left Sherman’s to start his own boutique after it emerged that he was in talks with fellow competition partners to join Quinn Emanuel Urquhart & Sullivan
Quinn Emanuel strikes in Paris with Allen & Overy and HSF hires
Michael Young, global co-head of arbitration at A&O and Isabelle Michou, head of Paris disputes at Herbert Smith Freehills join Quinn’s dispute resolution practice in Paris
Office Openings & Closings:
Specialist real estate planning boutique launched by partners from Herbert Smith Freehills, KWM and Gowling WLG
Planning partners Simon Ricketts (KWM), Patrick Robinson (HSF) and Clare Fielding (Gowling WLG) are teaming up with planning barrister Mary Cook (Cornerstone Barristers) to launch new firm
White & Case makes up eight London partners in 40-strong global promotions round