Big Five - Jefri threat to forensic work
Lawyers predict problems following Law Lords' Chinese Walls ruling in the Jefri vs KPMG case. Chris Quick reports
Lawyers predict problems following Law Lords' Chinese Walls ruling in the Jefri vs KPMG case. Chris Quick reports
The House of Lord’s landmark judgment in the Prince Jefri case will make it ‘very difficult’ for Big Five firms to maintain forensic accounting departments in their current forms, senior legal figures have warned.
The new guidelines, released by the Law Lords just before Christmas, challenge the use of Chinese Walls by firms. Their judgment called for firms to physically separate departments within firms to prevent confidential information being passed between them – even extending to segregated dining areas for staff.
Experts privately admit the new guidelines could be almost impossible to implement within the forensic accounting departments of large accountancy firms. ?It will be very difficult to set up Chinese Walls within a single department,? said one City lawyer.
The Lords’ judgment came almost a month after their ruling against KPMG in the last round of the firm’s legal battle with Prince Jefri of Brunei over the adequacy of its Chinese Walls.
In the judgment, Lord Millett said: ‘A Chinese Wall needs to be an established part of the organisational structure of the firm, not created ad hoc and dependent on the acceptance of evidence sworn for the purpose by members of staff engaged on the relevant work.’
He listed characteristics of adequate Chinese Walls, including the physical separation of departments, strict procedures and monitoring by compliance officers on the effectiveness of the walls.
KPMG circulated a copy of the ruling to its Big Five rivals. The firms are considering obtaining clarification by means of a counsel’s opinion.
Jeremy Cole, a solicitor with law firm Lovell White Durrant, which acted for Prince Jefri, commented: ‘Accountants will now need to review their own internal arrangements for the operation of Chinese Walls, based on the guidelines laid down by Lord Millett.’