Dentons to face SDT again after Court of Appeal clarifies misconduct test

Dentons’ long-running dispute with the SRA over allegations of historical money laundering failings is set to return to the Solicitors Disciplinary Tribunal following a Court of Appeal ruling yesterday. 

The court upheld a High Court decision to send the case back to the SDT, but stopped short of endorsing the SRA’s strict approach, instead clarifying that not every breach of the rules will automatically amount to misconduct.

Last year, the High Court found that Dentons’ failure to take adequate steps to verify a client’s source of wealth meant it was in breach of its regulatory obligations, and ordered the case to be reheard after the SDT had dismissed the failure as “entirely inadvertent”.

Dentons appealed, arguing that even if it had breached the Money Laundering Regulations, the failure was not serious enough to amount to a breach of the SRA’s core principles.

In a decision handed down on Monday (27 April), the Court of Appeal has now sent the case back to a newly constituted tribunal - but on a narrower basis than the High Court had envisaged.

‍Seriousness threshold

At the heart of the dispute is how Principle 7 of the SRA’s 2011 Principles - requiring firms to comply with legal and regulatory obligations - should be applied.

The SRA argued that any breach of the underlying legislation should automatically amount to a breach of Principle 7.

The Court of Appeal rejected that interpretation, warning it would represent a substantial departure from established principles and risk capturing minor breaches.

The correct question, the court said, is simply whether the conduct is “sufficiently serious”.

‍Alleged AML shortcomings 

The dispute began in 2024 when the SRA took Dentons to the SDT over allegations that the firm failed to do its due diligence in establishing a politically exposed client’s source of wealth.

The client, identified as the chairman of a state-owned bank in a non-EEA country, was inherited by Dentons when it acquired French firm Salans LLP in 2013. He was later convicted of embezzlement and sentenced to 15 years’ imprisonment.

The SDT previously found that while Dentons had breached the Money Laundering Regulations by failing adequately to establish the source of wealth, the breach was inadvertent and not serious enough to amount to misconduct, and dismissed the case.