Dentons v SRA: Court of Appeal rules seriousness threshold applies to Principle 7 AML breaches

The Court of Appeal has handed down a significant judgement clarifying when a breach of the Money Laundering Regulations 2007 (MLRs) will amount to a breach of Principle 7 of the SRA Principles 2011 and Outcome 7.5 of the SRA Code of Conduct 2011. In Dentons UK and Middle East LLP v Solicitors Regulation Authority Ltd [2026] EWCA Civ 508, the court held that an inherent threshold of seriousness applies to all SRA Principles — including Principle 7 — and that the Solicitors Disciplinary Tribunal (SDT) is not bound to find a breach simply because a regulatory contravention has been established.

Dentons inherited a client relationship with a politically exposed person (Client A) following its 2013 merger with Salans LLP. Despite identifying Client A as high risk and receiving an intelligence note describing him as "supremely unlikely" not to have benefited from $1 billion that went missing from a bank he chaired, the firm continued to act, relying on the assurances of a non-SRA-regulated former Salans partner, Mr Chateau, that adequate source-of-wealth enquiries had been made. They had not.

The SDT found the firm had breached Regulation 14 of the MLRs by failing adequately to establish Client A's source of wealth, but dismissed the allegations of breach of Principles 6, 7 and 8 and Outcome 7.5, characterising the breach as "entirely inadvertent." The SRA appealed successfully to the High Court, where Lang J held that any breach of Regulation 14 automatically constituted a breach of Principle 7 and Outcome 7.5, with seriousness relevant only to sanction.

The Court of Appeal's reasoning

Lord Justice Bean, Lord Justice Jeremy Baker and Lord Justice Zacaroli allowed Dentons' appeal in part, rejecting what they termed the "grammatical interpretation" advanced by the SRA — namely, that the plain words of Principle 7 require compliance with all legal obligations such that any breach, however minor, automatically establishes a disciplinary violation.

The court identified two fundamental objections to that approach. First, it would represent a dramatic and unheralded departure from the common law understanding of professional misconduct, under which — as Lord Denning MR articulated in In re a Solicitor [1972] 1 WLR 869 — a considerable level of seriousness has always been required. Second, it would sit in tension with the SRA's own Procedural Rules, which impose a seriousness threshold before any matter may be referred to the SDT, and with section 28(3)(a) of the Legal Services Act 2007, which requires regulatory activity to be proportionate and targeted only at cases where action is needed.

The judgement draws a careful distinction between Beckwith v SRA [2020] EWHC 3231 and SRA v Leigh Day [2018] EWHC 2726. In Beckwith, the Divisional Court rejected the argument that the SDT must first ask, as a free-standing question, whether conduct amounts to "professional misconduct" before applying the Principles. The Court of Appeal confirmed this remains correct — but emphasised that Beckwith did not hold that seriousness is irrelevant. An evaluation of seriousness is inherent in the application of each Principle, including Principle 7.

The applicable test

The court declined to adopt the tripartite formula — "serious, culpable and reprehensible" — drawn from the Scottish decision of Sharp v Law Society of Scotland [1984] SC 129, cautioning against its use as a rigid formula in the English regulatory context. The applicable question for the SDT is whether the conduct in question would be considered sufficiently serious by competent and reputable solicitors such that it be categorised as professional misconduct.

Outcome and remission

The court upheld the quashing of the SDT's decision on Principle 7 and Outcome 7.5, but on narrower grounds than Lang J. The factual findings made by the first tribunal up to paragraph 9.377 of its decision are preserved. A freshly constituted SDT must determine, on the basis of those findings, whether the firm's conduct meets the seriousness threshold and, if so, what sanction follows. The court was not persuaded that the SDT's characterisation of the breach as "entirely inadvertent" was sustainable given the firm's obligation under the SRA Principles not to permit others to breach the Principles on its behalf — and given the scope and duration of the failure.

The allegations of breach of Principles 6 and 8 — which the SRA had not appealed at High Court level — are not remitted. Costs remain to be determined.