Chester 01244 405555

Grosvenor Court
Foregate Street Chester
Cheshire CH1 1HG
DX: 19990 Chester

Shrewsbury 01743 443 043

Lakeside House
Oxon Business Park
Shrewsbury SY3 5HJ
DX: 148563 Shrewsbury 14

Manchester 0844 800 8346

Pall Mall Court
61-67 King Street
Manchester M2 4PD

Send us a message
Our Offices

Know Your Client Checks – A Lesson From BHS for Professional Firms

23rd September, 2016

As you will know, it is a legal requirement for advisory firms to carry out ‘know your client’ checks. The purpose of doing so is to confirm your client’s identity and to seek to provide protection in respect of Anti Money Laundering (AML) and terrorist financing. The BHS experience before the Work and Pensions Committee and Business, Innovation and Skills Committee shows firms need to think beyond AML obligations.

A lesson can be learnt from the actions of the advisors involved in the various stages of the sale of BHS. The firms are accused in the media of relying on each others presence throughout the deal and therefore, failing to carry out proper due diligence. The firms have acted lawfully but the reputational effects means in the future, professional advisors (accountants, solicitors, bank and corporate financers) may wish to go a step further to protect their own reputations in the media and before Parliamentary Committees. Compliance with AML and wider professional obligations, it appears, is no longer enough.

The Parliamentary enquiry outline suggests that many of the advisors closely involved, claim to have drawn comfort from the presence of others. Namely, River Rock initially took comfort from the presence of Linklaters and Goldman Sachs. Linklaters seemingly took comfort from the presence of Olswang and Taveta and Sir Philip Green argued that the presence of Olswang and Grant Thorton helped give Dominic Chappell (purchaser) credibility. In reality, Dominic Chappell had a record of bankruptcy, no retail experience and no experience of running a similar sized company.

AML is a hot topic for the Solicitors Regulation Authority (SRA) and has been for some years. In May 2016 they released a report following a thematic review of Anti Money Laundering compliance by solicitors to ascertain how well firms were managing the risks in this area and to ensure solicitors and firms were up to date with the statutory and regulatory obligations in this area. On 8 December 2014 the SRA issued a money laundering and terrorist financing warning notice, advising and training firms on these obligations. Many solicitors seem to know the wider principles but are unaware of the warning note.

There are a number of upcoming changes due to the 4th EC Directive on Money Laundering and therefore, firms for reputational, professional and legal obligations wise will want to review what we would argue is an unfortunate and unjustified slur on professional practices working methods which were appropriate but have still posed a reputational risk. The reaction of sophisticated commercial clients to what we would assert are misconceived and unrealistic expectations raised by politicians and the media will inform how professional practices should deal in the future. However, those we advise and train will be asked to consider and record:

  1. The standing of any known purchasers of large entities;
  2. What due diligence they have done on any key individuals;
  3. How have they gone beyond their AML minimum requirements?; and
  4. What reputational issues arise and how are they managing those risks?

 
If you need legal advice or training on issues of AML compliance or feel that you or your colleagues would benefit from training in relation to managing these risk, contact our Professional Practices Department immediately to receive specialist advice and/ or to arrange training.

Paul Bennett

Partner in Professional Practices and Employment Law

Direct Dial: 01743 453685

Email: [email protected]

You might also be interested in...

Legal expert’s data protection workshops pull in the crowds

22nd May, 2018

With the General Data Protection Regulation (GDPR) coming into force in May, businesses across Shropshire have been flocking to hear more about the new laws Paul Bennett, a partner at law firm Aaron & Partners LLP, has been delivering seminars in partnership with the Shropshire Chamber of Commerce An employment solicitor from Shrewsbury is urging businesses across the... Read More »

Experienced HR leader joins Aaron & Partners LLP

15th May, 2018

Experienced HR leader joins Aaron & Partners LLP Law firm with offices in Chester and Shrewsbury appoints Kate Robertson to drive HR strategy for more than 120 staff and to support the company’s growth Chester law firm Aaron & Partners LLP has strengthened its senior leadership team with the appointment of an experienced human resources manager. Kate Robertson... Read More »

When you should NOT pay the bailiff…

24th April, 2018

Jan Chillery, Insolvency Partner at Aaron & Partners LLP, shares her experience and the reasons why we should be cautious before paying so-called “bailiffs” over the phone or online without vetting them first. My neighbour has told me that recently he had a CCJ (County Court Judgment) against him. A day or so later, he received a phone call... Read More »

Contact Us