Don’t think it ends with the banks
18 July 2012
The banking scandals have highligted the need for ethics in business. Now’s the time for the Law Society to make its mark, says Mark Brandon
As senior executives at Barclays fall on their (rusty) swords for allowing their traders to fix Libor and HSBC executives in the US are forced to say sorry for laundering billions of dollars of drug-money, it is clear that we are looking at the tip of a very ethically polluted iceberg in the world of banking. No surprise to the more jaundiced of us there, then.
I’m sure most lawyers would argue that we are looking at two very different issues here. One is obviously dodgy from a regulatory point of view but more than likely not criminal, or not provably so in any event; the other is potentially criminal, but is at the very least a titanic regulatory failure. The dots do not join, but this is The Lawyer not The Banker so what has this got to do with us?
Allow me to join them. And to join them to lawyers.
The ripples are moving steadily outwards from the boulders dropped into the silvery pool of banking – other banks are in the frame – and it will not be long before they are lapping at the feet of the lawyers, both in-house and in private practice. The question of who knew what, and when is surely just as relevant for the lawyers involved in money laundering and all the other high jinks that have been surfacing in the banking world; from dodgy derivatives to Libor-fixing, from securitisations that will never pay their way to financing structures that allow money to disappear as if it had never existed.
I wonder at what stage the word ‘ethics’ pops up in the minds of these people. Does the concept really trouble the banker taking deposits from Syria, Mexico or Iran? Does it tweak the conscience of the lawyer acting for the dodgy property developer, roguish hedge-fund trader or family with the mysteriously cash-rich yet unprofitable chain of pizza restaurants and automotive body-shops?
How many times have I spoken to reputable City lawyers who describe a client as “a complete crook”? What does the word ‘ethics’ mean in the law? And is it most properly decided at the individual level – most ethical, some not – or is it something that every lawyer should be concerned about in a wider sense? Do rotten apples tarnish the whole barrel?
There are going to be some lawyers who will turn away the obviously dodgy client and some who will take them on, but if London can be described as “the best place to launder money in the world” (as it was on a horrifying Radio 4 programme I listened to the other night) then there must be an awful lot of lawyers choosing to turn a blind eye, either to client deposits into their accounts, or on sight of criminality involving literally billions of pounds a year.
If the UK legal profession is as porous as that assertion suggests, it surely impacts on the reputation of lawyers everywhere, just as corrupt bankers tarnish the whole industry.
Money laundering has two dimensions for law firms, an internal one relating to their own treatment of client money and as a commercial service to clients in the financial services industry.
I have acted for a small handful of money laundering experts in my career – let’s face it, there aren’t that many – and they have to a man and woman been frustrated by the attitudes of law firms to their practice. Law firms, they feel, are very good at finding ways to facilitate what their client wants to do, no matter how crazy or borderline it may be, and very poor at persuading them just how bad it would be to do certain things. There is, after all, very little money in prevention. Regulatory is a Cinderella practice in most UK law firms, regarded as a boffinish discipline, difficult to leverage and lacking the fee-generating capacity of corporate or banking. US law firms trying to replicate their East Coast regulatory practices in London have struggled.
Far from being an abstract, academic concept, though, money laundering has a very real impact on the lives of everyone; the ability of criminals to move their money around underpins drug-crime, murder and terrorism, yet all too often the very mention of the word causes lawyers’ eyes to glaze over.
But while the ability of the man in the street to do anything about it, should he want to, is limited, the legal profession sits right at its heart.
The president of the Law Society, Lucy Scott-Moncrieff, has posted online for suggestions as to what the Law Society can do – “good ideas for tough times”. I humbly suggest having a go at this.
The banks are paying a terrible price for utterly failing to regulate themselves, not just legally but ethically, having tantrumed endlessly to be able to do it. We as a country will end up paying a more terrible price for allowing it – for sleepwalking into calamity, driven by greed, as if our endlessly stimulated lust for new cars and plasma TVs excuses a system-wide breakdown in ethics on the part of those we trusted to do their jobs properly.
The legal profession, to all intents and purposes self-regulated, and very good at closing ranks when fellow professionals find themselves in a spot of bother, is in just as delicate a position.
Rather than simply trying to help high street firms rearrange the deckchairs on the deck of the ABS Titanic, perhaps the Law Society could consider a broader thrust in the direction of ethics, reorientating the solicitors’ profession as guardians of probity and responsibility in a world that at times seems to be circling the drain.
Mark Brandon is managing director of Motive Legal Consulting