Leading Law Firms in the Spotlight Over Standard Chartered Sanctions Investigation
12 Feb 2016

U.S. prosecutors are investigating whether New York-based law firm Sullivan & Cromwell LLP and London firm Slaughter and May provided improper advice to global bank Standard Chartered during a sanctions violation investigation in 2012.

Standard Chartered was fined $667 million by New York state authorities following allegations that the bank assisted clients connected to sanctioned countries by moving money through the U.S. financial system.

The probe was reopened in 2014 to ascertain if the bank had withheld evidence over sanctions violations connected to Iran in the 2012 investigation.

As part of the inquiry, prosecutors have requested emails and documents from both law firms to establish whether they offered improper advice to Standard Chartered concerning the submission of information.

This is one of the relatively rare instances in which law firms have been dragged into the spotlight during investigations into global banks’ wrongdoing.

Sullivan & Cromwell and Slaughter and May are not the first advisers of the bank to be implicated in the ongoing investigations. Consulting firm Promontory Financial Group LLC was fined $15 million by the Department of Financial Services last year for allegedly softening some of its reports to regulators concerning Standard Chartered’s compliance.

Historically, banks have frequently been able to rely on the advice of law firms concerning what they should and should not disclose to regulators as a shield against allegations of being less than wholly forthcoming. Provided banks could show that they had relied upon the opinions of their legal advisers in good faith, any penalty for failing to disclose information later found to be relevant would likely be substantially reduced.

As US regulators continue to encourage full and frank disclosure at an early stage, this case may be an indication that the historic consensus in this area – by which the word of the lawyers was (almost) above reproach – is now under increasing strain.

 

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