Thursday 19 December 2013
An IBA survey of law firm clients, including general counsel, has highlighted concern over integrity risks at law firms.
The report – ‘Anti-Corruption Compliance and the Legal Profession: The Client Perspective’ – was launched at the IBA Annual Conference in Boston in October 2013.
More than 60 per cent of respondents expressed concern over the relationship between firms and the judiciary, with similar numbers concerned over law firms’ relationship with public authorities. More than 80 per cent of respondents suggested private practice law firms posed some bribery and corruption risks; but nearly two-thirds admitted they did not have a policy in place for monitoring the level of compliance of third parties. Those who did monitor their law firms’ compliance said they employ a range of techniques, including constant supervision, periodic certifications and regular ethical and reputational checks.
Some respondents felt unhappy about the amount or quality of anti-corruption advice offered by their external legal advisers: 65 per cent felt that external legal counsel ‘always’ or ‘frequently’ had enough relevant anti-corruption expertise, the remainder responded ‘sometimes’ or ‘rarely’. Twenty per cent of respondents said they had exerted influence on external lawyers to improve their anti-corruption compliance, with 33 per cent asking to review a law firm’s ethics code.
The report states: ‘the fact that a significant proportion of respondents feel it is necessary to prompt their external legal counsel to improve their anti-corruption policies is further evidence of lawyers’ failure to fully comprehend the pressing business needs of their clients’.
The IBA survey also found that as a result of these perceived risks, companies were extending the strict compliance practices applied to other intermediaries, to law firms. Almost two-thirds of respondents reported an increase in pre-retention due diligence during the last five years, while almost half revealed an increase in monitoring due diligence.
Law firms respond
James Maton, a partner at Edwards Wildman, said raising the focus internally within law firms on bettering their own compliance with anti-corruption laws was ‘a kind of virtuous circle’, which he welcomed.
Rod Fletcher, a partner at Herbert Smith Freehills, agreed, but said the report's conclusions might be surprising ‘to those who assume that the ethical standards imposed [on lawyers] are sufficient to prompt firms to adopt a high standard’ of such compliance from the outset.
However, Fletcher acknowledged that, in the last six months, the press had reported that a London lawyer had been arrested on suspicion of police bribery, and a prosecutor in Indiana had pleaded guilty to corruption charges after modifying a convict's sentence, seemingly backing up the sentiments of survey respondents with regards their law firms’ ethical standards.
Speaking during the launch of the report in Boston, Tim Dickinson, Co-Chair of the IBA Anti-Corruption Committee, said: ‘lawyers need to realise that anti-corruption compliance is not only a regulatory requirement, but also a demand and an expectation from clients.’
Nick Benwell, partner at Simmons & Simmons and Co-Chair of the IBA Anti-Corruption Committee, told In-House Perspective it was also necessary to have high standards of corruption controls, not only for regulatory or ethical reasons, but also because it makes good business sense to do so.
He added that since the introduction of the UK’s Bribery Act, there was an increased expectation from clients for law firms to implement a comprehensive anti-corruption compliance programme.
‘This expectation has ensured that compliance is now treated as a key part of a law firm’s relationship with their client’, said Benwell. ‘Similarly law firms are conducting their own due diligence on third parties with whom they do business and so the scrutiny continues down the chain’.