In Industry Insights


The year started with the shock resignation of Catherine Dixon as the Law Society’s Chief Executive. She went down in a blaze of glory criticising the Law Society as “moribund, old-fashioned and bureaucratic”, with a corporate governance structure that apparently making her work impossible.



In February the Legal Ombudsman was forced to pull complaints data from its website after there were serious concerns over the accuracy of the data (it has since reappeared, hopefully cleansed).


We also began to see the early signs of the fallout from the December 2016 Competition and Markets Authority report into the legal services sector, which called on regulators to improve price transparency in the marketplace. The Law Society came out immediately suggesting that publishing prices could be misleading and confusing to customers. Whereas the SRA took the view that there is a gap and untapped latent legal market, partly because clients find it hard to compare solicitors and find prices.



In a recurring theme, March saw an extremely busy month for the Information Commissioner’s Office (ICO). With just over a year to go before the implementation of the GDPR, the regulator announced that it needed 200 more staff to deal with the flurry of investigations, consultations, enforcement, and GDPR issues. Our newsletter often carries stories of ICO enforcement. With GDPR looming, they are certainly acting like an emboldened regulator. One that has often been criticised for lack of teeth.



In April we examined what we called the “culture of fear” in a blog on our website and on legal futures. After a spate of disciplinary decisions which saw relatively inexperienced lawyers being struck off for what appeared to be mistakes and dishonesty emanating from a fear of sticking their hand up, we questioned whether it was in everybody’s best interest for law firms to consider whether their reporting lines and culture are hampering their professional ethics.


April also saw the spring update to the 2016/2017 Risk Outlook by the SRA. Of note there was a significant update to the cybercrime risk, with data suggesting that 25% of all law firms had been targeted by cyber criminals and three quarters of those attacks had been email modification fraud. This is a serious issue that isn’t going away.


In the same month the Bar Standards Board also began to authorise and regulate advocacy and litigation ABSs, becoming the 5th ABS regulator.


The Legal Services Board (LSB) also jumped onto the price transparency bandwagon, throwing its weight behind the CMA report and the SRA’s mandatory price information proposals, thereby all but ensuring that the SRA’s consultation will go through.


April also saw alarm bells starting to ring about the serious fraud office’s case (SFO v ENRC), which raises huge issues around the erosion of legal professional privilege. The case is to be appealed in July 2018.

And after 18 months of consultation, the SRA finally announced that the SQE (pronounced “skewy”) is to be introduced in 2020. SQE marks a radical overhaul of the route to solicitor qualification and, it seems, is facing fierce criticism from several fronts.



With just one month to go before implementation, in May we were still waiting for the final text of the Money Laundering Regulations 2017…



June was a hectic month. The final text of the Money Laundering Regulations was published at the 11th hour, with implementation just three days later. See our blog for an overview of the money laundering regulations and how they apply to most law firms (we believe that risk assessment is the key).


The SRA also announced a radical overhaul (due to come into effect in autumn 2018) to its Code of Conduct, Principles and Accounts Rules. Bye bye OFR! The Code of Conduct and Accounts Rules will be significantly slimmed down and simplified with a lot of the guidance moving into tool kits and other resources. This does of course mean that solicitors are going to have to get to grips with a brand-new code of conduct, this time one which is split into a code for individual solicitors and one for firms. For those of you who like the flexibility of broad principles, this is good news. Not so much for those who like a proper rulebook.


At the same time, it also became clear that the SRA is planning to reform the Practice Framework Rules to allow solicitors to practise in unregulated businesses. If the current proposals go through, it would mean that a solicitor would be able to hold themselves out as practising whilst not offering the full regulated service and the protections that that brings with it. Given that a significant proportion of legal services are not ‘reserved’, potentially this is more disruptive to the profession than ABSs ever were. The argument for making the change being that there is already an unregulated legal market, and solicitors are the only people who cannot currently compete in it. Conversely, the fear is that it will result in confusion about who is properly regulated, a two-tier profession, and a dilution of the solicitor brand.


In June we also saw the publication of a mandatory (and rather poorly drafted) survey that all SRA regulated firms were required to submit regarding their financial services. We know for a fact that a lot of firms filled this in incorrectly, partly because of the wording of the questions, partly because very few people actually understand the Financial Services and Markets Act. We saw examples of submitted questionnaires which, because a certain box was ticked in error, suggested that the firm should have been fully-FCA authorised. We may not have heard the end of this.


The first Warning Notice of the year was also published in June. The SRA is concerned by the way in which fraudsters target solicitors to endorse scam investment schemes, such as land banking, carbon trading, off plan foreign property and other too-good-to-be-true schemes. Lending your name to such schemes is now clearly a disciplinary issue.



July was a much quieter a month (thankfully, because the Bray household welcomed a new addition to the family). The SRA did publish its 2017/2018 Risk Outlook, albeit without the usual fanfare. If you haven’t yet gotten around to reading it, have a look at our overview guide for starters, which highlights the 8 priority risks identified by the regulator. We have to say we are a fan of the Risk Outlook as an on-going piece of work.


The FCA treated us to some unusually useful guidance on how Politically Exposed Persons (PEPs) should be treated under the new Money Laundering Regulations. Although this guidance is aimed at financial services firms, it is equally applicable to lawyers.



In August everyone was on holiday, even, it  would appear, the Information Commissioner. The ICO started writing (from a sun lounger, no doubt) a very useful series of blogs busting the GDPR myths, which we found to be a useful antidote to some of the scaremongering that has gone on.



With everyone back at their desks in September, things definitely picked up. Firstly, there were four new Warning Notices published by the SRA in quick succession: on PPI claims; holiday sickness claims; sending offensive messages by email and social media; and ‘aggressive’ tax avoidance advice. They are all essential reading.


The big news of the month was that the Criminal Finance Act 2017 came into effect – a statute that establishes a new corporate offence of ‘failure to prevent the facilitation of tax evasion’ (a great tongue twister if ever we’ve heard one). Firms touching on any form of tax advice should be addressing now how this might affect them. Corporate firms in particular are taking the CFA very seriously indeed.


Under the radar, the Law Society and HMRC jointly issued a very useful practice note on property fraud, which is recommended reading from all property firms.


Not wanting to shy away from controversy, the SRA published its radical consultation on price and service transparency in this month, along with those ‘unregulated’ solicitor plans. Phase Two of the ‘Looking to the Future’ consultation closes on 20th December 2017.


The Ministry of Justice rejected the ICAEW’s application to further encroach on the legal services market. The ICAEW which is already an ABS regulator, and can regulate probate activities, had applied for all of the six reserved activities including litigation and conveyancing. Let’s just say that the accountancy regulator was not best pleased with this decision.


And finally in September, the Law Society published its draft guidance to the Money Laundering Regulations. Although this is still technically in draft, pending approval from the Treasury, it is more than likely the final text. This guidance will replace the old money laundering practice note which pretty much all law firms have relied upon for the last 10 years.



In October the LSB approved small but significant changes to the SRA’s PII rules. There is no longer a need to purchase run-off cover when switching regulators – conveyancing firms take note.


Back on the theme of AML, the Treasury and the Home Office jointly published their National Risk Assessment as required by the Money Laundering Regulations 2017, including a significant section on legal services. In short, lawyers are still a significant target for money launders although not necessarily for terrorist financiers.


To celebrate the 10 years of the Legal Services Act, as a bit of fun we put up a slide deck on LinkedIn setting out some of the potential ABS models that we have come across and advise upon. We love the seemingly endless possibilities that the LSA presents lawyers for structuring their businesses. Every week we seem to come across something new.



In November we launched a LinkedIn group, which is designed as a space to address and talk about potential compliance issues. For compliance officers it can also be used for your own Continuing Competence. At the moment it’s still a private group, so please let us know if you would like to contribute.


The Law Society published a gloomy sector forecast for legal services, and was also hit with a judgement by the Advertising Standards Authority ruling which said that the advertising for CQS (Conveyancing Quality Scheme) was misleading. Turns out, the accreditation overplayed the ‘quality’ bit. Cue lots of CQS firms scrambling around to review their own marketing materials.


In November the front pages were filled with salacious stories from the Paradise Papers. Whatever you think of Lewis Hamilton’s private jet scheme, the story highlights that lawyers are increasingly seen as a soft touch when it comes to hacking and accessing sensitive confidential documents held electronically.



At the time of writing, it has been relatively quiet. A chance to review and regroup, perhaps?


That was a whistle-stop tour of our year. Make sure to join our mailing list to receive regular updates on SRA-related bits as they happen. The big two events of 2018 are going to be the implementation of GDPR in May (you are going to hear a lot about this over the coming months), and the introduction of the new SRA Code of Conduct, probably in late Autumn 2018. But to kick off the year you will be asked to submit a mandatory survey on your AML arrangements… enjoy!

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