A Law firm’s human errors led to a breach of the Russia (Sanctions) (EU Exit) Regulations 2019

The SRA rebuked Steptoe International (UK) LLP for its compliance with the Russia (Sanctions) (EU Exit) Regulations 2019 and the SRA Code of Conduct for Firms 2019.

The SRA investigation revealed multiple breaches of Treasury licence conditions

• Related to two clients,
• Primarily due to inadvertent human error by one individual.  

Key points include:

• Regulation 67(2) of the Russia Regulations states that failing to comply with any condition of a Treasury licence constitutes an offence  
• The firm's self-report and subsequent correspondence highlighted these breaches  
• Despite having appropriate licences and policies, the firm did not meet all the conditions of the licences  

The Solicitors Regulation Authority (SRA) issued a written rebuke, noting that the breaches were isolated incidents and did not cause significant harm. The firm has since implemented additional policies to prevent recurrence.  

LONGER READ,

The London office of a US law firm has been rebuked for breaching the conditions of a Treasury licence to act for sanctioned Russian clients.

Steptoe International (UK) LLP accepted the penalty in a regulatory settlement agreement with the Solicitors Regulation Authority (SRA).

A notice published yesterday said the firm’s self-report and subsequent correspondence set out multiple breaches of Treasury licence conditions for two clients, in breach of The Russia (Sanctions) (EU Exit) Regulations 2019.

• “While appropriate licences had been obtained in respect of these matters and the firm had policies and processes in place, the firm failed to comply with all conditions of the relevant licences, owing to inadvertent human error (largely on the part of one particular individual).”

Regulation 67(2) of the regulations states that a “person who purports to act under the authority of a Treasury licence but who fails to comply with any condition of the licence commits an offence”.

Steptoe admitted that this was a breach of paragraph 3.1 of the SRA Code of Conduct for Firms, which requires that.

• “You keep up to date with and follow the law and regulations governing how you work”.

The SRA said a written rebuke was the appropriate outcome because there was “no lasting significant harm” to consumers or third parties.

The breaches were borne out of administrative and human error, isolated occurrences, and do not cause severe or lasting damage to the purposes of the sanctions regime.

Steptoe has implemented additional policies to prevent a recurrence and completed a thorough investigation “to ensure that any issues have been identified.”

As a result, there was “a low risk of repetition”.

However, the SRA said, “Some public sanction is required to uphold public confidence in the delivery of legal services.”

Steptoe is also to pay the SRA costs of £600.

We have approached the Office for Financial Sanctions Implementation (OFSI), which is part of HM Treasury, to ask whether it was also taking action against Steptoe.

APRIL

In April, OFSI’s legal services threat assessment report revealed that most sanctions non-compliance by UK legal services providers were breaches of licence conditions.

• https://www.legalfutures.co.uk/latest-news/ofsi-lawyers-sanctions-failures-mainly-down-to-licence-breaches

The month before, OFSI fined the Russian arm of top City firm Herbert Smith Freehills £465,000 for breaching sanctions in the way it closed its operation in the country.

• https://www.legalfutures.co.uk/latest-news/city-giant-fined-465k-for-sanctions-breach-by-russian-arm

References

[1] SRA | Steptoe International (UK) LLP - 635838 | Solicitors Regulation ...https://www.sra.org.uk/consumers/solicitor-check/635838/

[2] London arm of US firm rebuked for breaching Russia sanction rules https://www.legalfutures.co.uk/latest-news/london-arm-of-us-firm-rebuked-for-breaching-russia-sanction-rules