How can you get people to understand why they have to comply with onboarding policies, particularly those related to AML? The problem is that sometimes the consequences of non-compliance in law firms are just a bit abstract.
- A bad report from the SRA? Well, that’s for the MLCO and COLP to deal with.
- Maybe even a fine? Ah, it’s not coming out of my pocket.
- Reputational risk? Look, it’s not like my social circle goes around marking each other on the reputation of the firm we work for.
- The PII premium going up? Hey, you want to run a law firm and get me to slog for you getting these transactions through – you can pay to protect it.
With all of these things, the consequences are almost painted at too-high a level. Of course, the ramifications would filter down but, as the fee earner isn’t the person waiting on the edge of their seat for the SRA desktop findings to come back and – gulp – having to report on them to the Board, it can be hard to get the message through to everyone in the firm.
Making it relevant
But what do they understand? Well, regardless of whether or not you or your firm time-records, pretty much everyone who works on matters (whether that’s fee earners, paralegals or admin support staff) understand the basic rules of time-recording. Your day is notionally split into 6-minute units and that’s what forms the basis of your bill to the client.
Of course, many teams who work on transactional matters might work on fixed-fee, or the increasingly popular value-based pricing. That doesn’t matter: they still understand the principles of it.
There’s always a tendency to discount the time and effort that other people expend on things, particularly if they’re not exactly doing you a favour or making your life easier. But if you want to try to get the message through to a fee earner just how disruptive their continued lack of compliance can be, breaking it down into painful, pedantic steps can open their eyes.
Take the following example of something we probably all see more than we would like – funds hitting the client account and a cursory look from the cashier flags that it doesn’t look like there’s any information about the source of funds on the file. Let’s see what happens next if we ascribe everyone an hourly rate and recognise how much involvement they have to do – just as fee earning staff would if they were time-recording on a matter:
| Staff member | Hourly rate | Action taken | Units | Total cost | Running cost |
| Cashier | £175.00 | Funds received from client – check and note that source of funds questionnaire on file not complete | 1 | £17.50 | £17.50 |
| Cashier | £175.00 | Refer to Accounts Manager – ask for action | 1 | £17.50 | £35.00 |
| Accounts Manager | £280.00 | Question from Cashier – review | 1 | £28.00 | £63.00 |
| Accounts Manager | £280.00 | Direction given to Cashier – check with Fee Earner, copy in Compliance Manager | 1 | £28.00 | £91.00 |
| Cashier | £175.00 | Receive direction from Accounts Manager – email Fee Earner | 1 | £17.50 | £108.50 |
| Fee Earner | £260.00 | Receive email from Cashier | 1 | £26.00 | £134.50 |
| Fee Earner | £260.00 | Forward to Paralegal – please check if we have SoF questionnaire | 1 | £26.00 | £160.50 |
| Compliance Manager | £290.00 | Email to Fee Earner – understand funds have been received with no source of funds, must be dealt with urgently in case AML concerns | 1 | £29.00 | £189.50 |
| Fee Earner | £260.00 | Email to Compliance Manager – understood, we are dealing | 1 | £26.00 | £215.50 |
| Paralegal | £175.00 | Receive email from Fee Earner | 1 | £17.50 | £233.00 |
| Paralegal | £175.00 | Go back to look at emails from client – never completed source of funds questionnaire. Double-check in case missed as don’t want to embarrass myself by asking client to do the same thing again | 3 | £52.50 | £285.50 |
| Paralegal | £175.00 | Email to Fee Earner – explain, shall I email client? | 1 | £17.50 | £303.00 |
| Fee Earner | £260.00 | Email in from Paralegal | 1 | £26.00 | £329.00 |
| Fee Earner | £260.00 | Email to Paralegal – yes, email client | 1 | £26.00 | £355.00 |
| Paralegal | £175.00 | Email from Fee Earner received | 1 | £17.50 | £372.50 |
| Paralegal | £175.00 | Email client – we have received funds, we need source of funds questionnaire and evidence completed as per previous email | 1 | £17.50 | £390.00 |
| Paralegal | £175.00 | Email in from client – funds from income. No attachments | 1 | £17.50 | £407.50 |
| Paralegal | £175.00 | Email to client – please clarify. Please complete questionnaire, we need details. We need evidence e.g. bank statements | 1 | £17.50 | £425.00 |
| Paralegal | £175.00 | Email to Fee Earner – no response from client, what shall I do? | 1 | £17.50 | £442.50 |
| Fee Earner | £260.00 | Email to client – per Paralegal email, please respond asap, otherwise delay transaction | 1 | £26.00 | £468.50 |
| Compliance Manager | £290.00 | Email to Fee Earner – update please | 1 | £29.00 | £497.50 |
| Accounts Manager | £280.00 | Check with Cashier – any update? | 1 | £28.00 | £525.50 |
| Cashier | £175.00 | Response to Accounts Manager – no update | 1 | £17.50 | £543.00 |
| Accounts Manager | £280.00 | Email to Fee Earner and Compliance Manager – any update, these funds need posting or returning | 1 | £28.00 | £571.00 |
| Fee Earner | £260.00 | Email from Compliance Manager | 1 | £26.00 | £597.00 |
| Fee Earner | £260.00 | Email from Accounts Manager | 1 | £26.00 | £623.00 |
| Fee Earner | £260.00 | Check with Paralegal – any update? | 1 | £26.00 | £649.00 |
| Paralegal | £175.00 | Response to Fee Earner – no update yet | 1 | £17.50 | £666.50 |
| Fee Earner | £260.00 | Email to Compliance Manager and Account Manager – still waiting | 1 | £26.00 | £692.50 |
| Compliance Manager | £290.00 | Email – please phone client and ask them to respond urgently otherwise will have to consider reporting/sending funds back | 1 | £29.00 | £721.50 |
| Paralegal | £175.00 | Phone client x 2, leave VM, tell Fee Earner | 2 | £35.00 | £756.50 |
| Fee Earner | £260.00 | Email update to Accounts and Compliance Managers | 1 | £26.00 | £782.50 |
| Compliance Manager | £290.00 | Nosing around the file – note that CMRA is not complete. Checking ID and V, seems ok. Confirm no source of funds questionnaire sent back – note that it was sent by Paralegal but not chased up. Note that enquiries have been raised and searches instructed, report on title has been drafted and sent, funds requested for deposit with aim to exchange early next week. | 4 | £116.00 | £898.50 |
| Compliance Manager | £290.00 | Email Fee-Earner – advise of file lapses as per review. CMRA needs to be completed, breach not to have followed up and obtained SoF. Substantive work should not have taken place without this. | 1 | £29.00 | £927.50 |
| Fee Earner | £260.00 | Email from Compliance Manager | 1 | £26.00 | £953.50 |
| Compliance Manager | £290.00 | Email Head of Department to advise of issue | 1 | £29.00 | £982.50 |
| Head of Department | £320.00 | Email in from Compliance Manager | 1 | £32.00 | £1,014.50 |
| Head of Department | £320.00 | Email to Fee-Earner – what’s going on | 1 | £32.00 | £1,046.50 |
| Fee Earner | £260.00 | Email from Head of Department – sigh while reading | 1 | £26.00 | £1,072.50 |
And we still don’t have the source of funds!
Going nowhere fast (and expensively)
In fact, not only is the transaction on hold while we scrabble for the source of funds, but the Compliance Manager is now considering that they need to escalate this to the MLRO. The fact that the client has deposited money with the firm and now isn’t providing appropriate source of funds is arguably a red flag for money laundering risk. That’ll be a careful email to the MLRO, with a summary of the matter and action to date.
The MLRO will then:
- receive this
- acknowledge it
- look at the file
- add it to her own “to-do” list to check for updates
- remind herself on the criteria for making a SAR
- perhaps email us here at JBL and ask if we can urgently jump on a call to provide some advice…
And, of course, in the background, the Fee Earner and Paralegal are still trying to get hold of the client, the Cashier is still asking what to do with the funds, the Accounts Manager is still asking the Compliance Manager for updates, the Head of Department has added this matter to their list of things to look at, and so on.
What a nightmare. And all because the Fee Earner embarked on the transaction without checking that all of the due diligence was in place.
