The legal sector was recently shaken by the case of Oliver Bretherton, a former legal director at an international law firm, who was struck off by the Solicitors Disciplinary Tribunal (SDT) for sexually predatory conduct involving junior staff members.
This case is a sobering reminder of the importance of maintaining professional integrity within the legal profession and has set a significant precedent for handling non-criminal sexual misconduct.
Leaders must also take account of the SRA’s appetite for targeting law firm management teams, in addition to the guilty parties. At the recent COLP COFA Conference, Paul Philip (SRA Chief Executive) said that the regulator aims to force firms into greater accountability. “The profession knows who the bad lawyers are…We will try and use fines as a way of instilling self-regulation,” he told a packed Birmingham conference hall.
In the intricate world of Anti-Money Laundering (AML) compliance, the stakes are high and the responsibilities vast.
Some law firms rely on central ‘onboarding’ teams to undertake the hefty task of client identification and verification. However, this must not be confused with the core risk assessment requirement, which is a job best suited to the front-line lawyer or file handler.
In law’s firm grasp where trust is a must,
Compliance not just advice, but a binding thrust.
Regulated firms in England and Wales,
Heed the SRA’s stern warning tales.
Money laundering’s shadow, regulations tight,
Since twenty-seventeen’s legislative light.
Yet files half-filled, risk assessments miss,
A call to action, a compliance kiss.
Through SRA’s lens, inspections are wide,
Revealing where systemic issues reside.
A lack of diligence, a due process lost,
In client checks, a line uncrossed.
Expectations clear, the SRA’s voice loud,
At client start, risk assessments avowed.
Due diligence must follow, an informed path tread,
With ongoing vigilance, by foresight led.
A template offers a structured guide,
For bespoke risks, that may abide.
But tailor and fit, each firm’s unique play,
In matters of risk, make no delay.
No mere checklist but a map to steer,
By thoughtful design, we mitigate fear.
Assessing each risk with precision and care,
In the digital age, a compliance affair.
Technology lends a hand, so firm and sure,
Innovation beckons, its promise pure.
To tailor risks, not a tick-box bore,
But a crafted defense, against compliance lore.
Each client, each matter, a risk to appraise,
With regular reviews, adjusting ways.
For non-compliance, the cost is steep,
A firm’s reputation, a trust to keep.
So law firms, take heed, in your noble run,
Against dirty money’s darkness, be the dazzling sun.
With help and guidance, your practice refine,
And in the galaxy of law, let your firm’s star shine.
Solicitors beware. There was a sinister and unexpected change in the SRA’s tone towards law firm compliance at the annual COLP COFA conference, held on 18 October 2023.
In this post, we look at what the SRA had to say about the likelihood of bigger and automatic fines, partner-level accountability, AML warnings, and the Compensation Fund levy.
You can also watch the recording of October’s webinar (see link below), which also covered these topics.
News and Guidance
- News: Discussions on interventions and client protection – Prompted by the fallout of the Axiom Ince affair, and following on from the other recent high profile interventions, the SRA appears to be working on ways to manage the risk of future large-scale law firm failures. There are several other ‘consolidators’ in the legal market and, as professionals primed to expect a £400 levy on practising certificates are aware, the compensation fund is already at breaking point.
- Survey: How do you manage risk? – Solicitors are being asked to complete a 15-minute survey to help the SRA understand attitudes towards risk in legal services.
Law Society Updates (may require login)
- CILEX proposals are seriously misguided and fail to consider the wider regulatory context – The Law Society is not a fan.
- Axiom Ince fallout – “As a representative body we recognise that regulatory decisions are by law a matter for the SRA, but we have a role to be assured that the SRA complies with its statutory duty and the regulatory principles guiding any regulatory action which must be transparent, accountable, proportionate, consistent and targeted.”
- National Crime Agency issues red alert warning that Russia is using gold to evade sanctions – Law firms should be alert to the risk of transactions involving the gold trade, particularly from ‘informal’ markets.
- Legal Futures: Lawyers should pay £150 levy to fund social welfare law – Legal Services Consumer Panel appears to enthusiastically support a proposal for solicitors to make mandatory contributions to fund law centres.
- LeO: An Ombudsman’s view of good costs service – Litigators may need to tell clients that other firms charge less in order to obtain ‘informed consent’ for deductions.
Free webinars and recordings
The annual SRA Compliance Officers Conference is a ‘must attend’ for compliance officers as the regulator sets out its current priorities.
If attending in person was not possible for you, the virtual event will be hosted by the SRA from 6th – 9th November.
Following the conference, Jon and Rachael took some time to reflect on the day. They discussed some of the key takeaways and the surprising tone of the SRA’s warnings to the profession.
Feel free to share this recording with colleagues who may be interested in this free training.
JBL clients get priority access to our live sessions.
Recording: Strategy hour – law firm insurance, recruitment and mergers
On Wednesday 27 September 2023, our monthly webinar focused on issues around buying and selling law firms, the insurance market and recruitment.
Our expert panel includes:
- Gary Horswell, Managing Director of Ntegrity Insurance Solutions – a specialist in the solicitors PII market since the ‘open market’ began in 2000.
- Jonathan Fagan, Founder and Managing Director of Ten Percent Group – a specialist in locum & permanent solicitor recruitment, as well as law firm sales, mergers & acquisitions.
- Jeff Zindani, Founder and Managing Director of Acquira Professional Services – a leading M&A matchmaker and broker for law firms and legal tech companies.
Recording: The dangers of using your client account as a banking facility and how to avoid it
Operating a client account can be an interesting business! Not only do you have increased money laundering and financial crime risks, you must also avoid acting like a financial institution.
Accounts Rule 3.3 states: “You must not use a client account to provide banking facilities to clients or third parties” …. and this can be quite tricky to navigate. Several solicitors have been fined and disciplined by the SRA under this rule.
But how do you avoid getting this wrong? What is a ‘banking facility’ and how does the SRA interpret the rule?
Fear not, we are here to help! In this webinar we looked at:
- The history of the ‘banking facility’ rule
- Why can we not act as a bank?
- SRA Guidance
- Disciplinary decisions relating to Accounts Rule 3.3
- Practical considerations for law firms
We were delighted to co-host this session with our friends at Thirdfort.
Unsurprisingly, we get asked many questions about source of funds, source of wealth, identification of clients, and the like. In the current world of regulation, we find many law firms are very nervous about ‘getting it wrong’ and want to ensure compliance.
In this webinar, our JBL team discussed some of these most common compliance queries with valuable input from Harriet Holmes of Thirdfort, including:
- Source of funds – how far do we need to go? How do I know I’m done?
- Source of funds – is the ‘Bank of Mum and Dad’ low risk?
- Source of wealth – can I take my client’s word for it?
- Risk assessment – do I need to do one at the start of every file?
- Ongoing monitoring – what should this look like in practice?
- Employee screening – we don’t DBS-check all our staff. Should we?
- Independent audit – how often does it need to be done?
- CDD – do I need to verify the identity of all the Directors of a client company?
- CDD – who do I need to verify in a trust?
SRA and SDT disciplinary decisions
- Leadenhall Law Group Ltd – rebuke for firm that acted on both sides of a property transaction without informed consent, despite putting in place safeguards.
- Rootes & Alliott – firm fined £1,900 for Accounts Rules breaches, including a failure to promptly rectify issues on the client account, not keeping proper records and ledgers, and not undertaking reconciliations at least every five weeks.
- Nigel J Humes & Co – sole practitioner fined £1,745 for AML breaches, including not having a compliant firm-wide risk assessment, making an incorrect declaration to the SRA, not having compliance policies, not conducting compliant risk assessments on clients and matters, and not keeping CDD records.