Hello, and welcome to your fortnightly dose of SRA-related delight. In this edition of COLP Insider, which may be the last one before the August break (it depends how active our regulators are in the next two weeks), we cover:

• The key takeaways from this week’s webinar on law firm culture
• How to prepare for the SRA’s AML data collection exercise
• Whether to reassess old files when you update your client and matter risk assessment process
• The SRA’s consultation on new financial penalties (note the proposed minimum fines…)
• And the usual roundup of disciplinary cases

As always, please do get in touch if you have any comments or suggestions for future newsletter items. We love hearing from you. Mostly.

Have a great weekend!

Jon and the team

How law firms can leverage the power of culture

Our latest webinar (“Shaping the Future: Leveraging the Power of Culture in Law Firms”) drew considerable interest from the legal profession, with over 100 participants signing up to the live session. Our panel comprised Jonathon Bray, Chris Sweetman, and Ed Marshall, who explored the regulatory and strategic importance of cultivating a positive culture in law firms. Here are the key takeaways from the session:

• The regulatory perspective, thematic reviews and rule changes
• Defining and shaping culture
• Strategic benefits
• Practical steps to cultivate positive culture

Read the article

Understanding The SRA’s AML data collection exercise 2024: A guide for COLPs

COLPs, along with MLROs and other senior role holders, play a critical role in this process. The SRA has written to COLPs advising them to “Get ready to provide information about your firm’s Anti-Money Laundering (AML) and financial sanctions activity“. This data collection exercise will take the form of a 44-question survey.

Read the guide

ICYMI: SRA Warnings on SLAPPs and NDAs: Key Takeaways from Our Latest Free CPD Webinar

In this recent webinar, “SLAPPs and NDAs – Latest Guidance“, we delved into the complex ethical terrain surrounding Strategic Lawsuits Against Public Participation (SLAPPs) and Non-Disclosure Agreements (NDAs). With increasing scrutiny from regulatory bodies like the Solicitors Regulation Authority (SRA), this discussion is more pertinent than ever. Here are the main themes, talking points, and takeaways from the session.

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ICYMI: SRA Issues New Warning Notices On Key Regulatory Concerns

The Solicitors Regulation Authority (SRA) has recently issued three important warning notices addressing critical areas of legal practice: mergers and acquisitions of law firms, missing client funds, and Strategic Lawsuits Against Public Participation (SLAPPs). These notices aim to uphold the integrity and trust in the legal profession by highlighting concerning behaviours and advising solicitors on best practices.

Whenever the SRA issues a Warning Notice it means they have identified compliance issues which they are actively looking to enforce. It is more than guidance. Here’s a breakdown of each warning notice and what solicitors should do in response.

Read more

News and Guidance

• SRA: New rules on fees in financial mis-selling work – The SRA has introduced new rules to limit “excessive” fees charged by firms handling compensation claims for mis-sold financial products. These rules, effective from 26 July 2024, align with the FCA’s guideline. Firms will have maximum fee limits for claims representation through financial service redress schemes, but can apply for approval of reasonable charges in certain circumstances.
• SRA: Bulk renewing your practising certificates (2024/25) – Full guidance on the PC renewal process, including all the questions you will need to be able to answer to complete the firm’s practice renewal.
• SRA: Board gives go-ahead for CILEX change – The consolidation of the SRA’s power in the legal sector took a significant step, as the SRA formally agreed to take over the regulation of legal executives.
• SRA Consultation: Financial Penalties: further developing our framework – The SRA’s new proposals are designed to incorporate the expanded fining powers granted by the Economic Crime and Corporate Transparency Act, which allows the SRA to impose unlimited fines for cases involving economic crime. Key elements of the consultation include: 1. New Fining Bands: The introduction of two additional penalty bands (E and F) for the most serious misconduct, potentially resulting in fines that exceed previous limits. 2. Minimum Fines: Under the proposals, the minimum fine for the least serious misconduct, known as Penalty Band A, would be £5,000 for firms (and £2,500 for individuals). Penalty Band A is likely to include unintentional misconduct causing nothing more than inconvenience or minimal cost. The ‘maximum minimum’ fine is proposed to be £500,000 and £100,000 for firms and individuals respectively, to be applied for the most serious Penalty Band F. 3. Drink Driving: The SRA plans to treat drink driving convictions with warnings or rebukes, except in cases with aggravating factors or repeated offences. 4. Clarity and Transparency: The consultation seeks to provide clearer guidance on how fines will be calculated, taking into account the impact and potential harm caused by the misconduct. The consultation is open until 20 September 2024.
• Legal Services Board: Update on our independent SRA review related to Axiom Ince – “As previously announced, the Legal Services Board (LSB) is conducting an independent review of regulatory events leading up to the Solicitors Regulation Authority’s (SRA) intervention into Axiom Ince. We have received the independent report from Carson McDowell LLP. We are now considering the next steps, in the light of the findings and recommendations. The report will be published as soon as due process has been completed.“
• Law Society: Compensation Fund levy: serious concerns about proposed rise – The Law Society has expressed significant concerns about the proposed increase in the Compensation Fund levy by the SRA. The levy for individuals is set to rise from £30 to £90, and for firms from £660 to £2,220. While acknowledging recent fund pressures, like the collapse of Axiom Ince, the Society seeks transparency and evidence from the SRA to justify the steep rise and asks about measures to reduce future fund claims.

Compliance corner – real life Q&As

“We have recently updated and improved our client and matter risk assessment process in anticipation of an SRA audit. Do we have to go back and risk assess old files?”

If by “old” you mean closed files, then no. The horse has bolted on those, unfortunately. Any issues which should have been captured during the risk assessment process will have already crystallised.

You do have an opportunity to update older active files, however. So long as you don’t attempt to mislead your SRA auditor.

Money Laundering Regulations

Under Regulation 28 of the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017, solicitors have an obligation to conduct thorough client and matter risk assessments for work that falls within scope, including transactions, probate, tax advice and “trust and company services”.

The importance of client and matter risk assessment is that it should inform the level of CDD to apply and the source of funds/wealth enquiries you should make. It is your “stop and think” opportunity.

See the SRA’s Warning Notice on client and matter risk assessments, in which the regulator highlights persistent non-compliance with this part of the Money Laundering Regulations. Key concerns include incomplete or ineffective assessments, failure to align with firm-wide risk assessments, and over-reliance on generic templates. Firms must ensure comprehensive, tailored risk assessments, record rationales for risk ratings, and continuously monitor and update assessments. A template risk assessment is available.

Since the warning, SRA auditors are focusing on client and matter risk assessments.

Retrospective Risk Assessment

Risk assessment is not a one-time snapshot. It is intended to reflect the shifting information available to the solicitor and the changing risk picture.

So there is a strong argument that, if your systems have been updated and improved, you should indeed revisit live files. It makes sense to prioritise files which are more likely to have elements of high risk, for example those involving offshore entities, complex property transactions, and clients based in higher risk countries.

You could also use this as an opportunity to demonstrate ongoing due diligence, by targeting files where there may have been material changes to the client profile or changes to instructions.

Transparency with the SRA

If your firm is anticipating an SRA visit, transparency is paramount. Attempting to mislead the auditor, even by omission of relevant information, is prima facie dishonesty and could have severe consequences. Instead:

• Document Retrospective Improvements: Clearly document any retrospective improvements made to risk assessments or CDD processes.
• Communicate Honestly: The SRA no doubt expects firms to review their process when they are notified of an AML audit. Be upfront about where and why these improvements were made. This demonstrates a proactive approach to compliance and enhances your firm’s credibility.

Best Practices

To ensure compliance and manage risks effectively, consider the following best practices:

• 1. Document Changes: Keep detailed records of changes to your risk assessment process and the rationale behind them. Use version control to clearly identify which document is currently in use.
• 2. Selective Reassessment: If you cannot physically reassess all files, focus on in-scope, high-risk, and materially changed files for reassessment under the new process.
• 3. Training and Awareness: Ensure all team members understand the updated processes and their application to both new and existing files.

If you have a question you would like us to answer in this section, feel free to send it to info@jonathonbray.com 

Free CPD

Recording: Shaping the Future: Leveraging the Power of Culture in Law Firms

Re-watch this week’s webinar, in which Ed and Jon chatted to expert Chris Sweetman about law firm culture. We talked about the regulatory angle, what culture is (and isn’t), and the strategic benefits of taking stock of culture and aligning behaviour with values.

Passcode: TzB08+1*

Read our blog on law firm culture here

Recording: NDAs and SLAPPs – latest guidance

Last month we hosted a webinar with Sophie Freeman of The Legal Director, discussing the SRA’s warnings around the use of Non-disclosure agreements and ‘Strategic Litigation Against Public Participation’.

Despite being separate warnings, there are common themes around balancing the competing duties to act in clients’ best interests versus upholding ethical principles. Acting with integrity, upholding the rule of law and maintaining public trust in the profession all come into play. Solicitors cannot blindly follow client instructions without considering the wider ethical context.

But where is the tipping point? Sophie had some very useful insight into the commercial use of NDAs, particularly in the employment and entertainment spheres.

The SLAPPs guidance may, at first glance, appear to be a niche area of concern. But the SRA Warning Notice has elements that apply to all litigators.

Watch the recording (use passcode CvalG&2k).

Recording: Attacks, hacks and cyber risks

Training your team: Master COLP and COFA Responsibilities

Are you ready to excel in your role as a Compliance Officer for Legal Practice (COLP) or Compliance Officer for Finance and Administration (COFA)? Our bespoke training courses ensure you meet SRA requirements with confidence. Choose from remote or in-person sessions tailored to your firm’s needs, covering essential duties, compliance strategies, and practical tips. Interact with experienced trainers, ask questions, and receive valuable insights to safeguard your firm and yourself.

Don’t miss out—request a free quote today!

SRA and SDT disciplinary decisions

• Andrew Bonell – retired solicitor agrees to removal from the roll after transferring £15k of client money, which had been dormant for 17 years due to an untraceable client, to the firm’s office account.
• Mabel Clarke – paralegal rebuked for ‘misleading’ a client about the progress of a Land Registry application.
• City Heights Legal Solutions Limited – firm fined £2,387 for multiple breaches following an SRA AML audit. This decision is worth a read for firms that have impending SRA audits.
• Eleanor Barber – fined 27% of her gross annual income (£5,569) following conviction for failing to provide a breath sample to the police.
• Zoe Diss – rebuked following drink driving conviction.
• Hennah Haywood Law Limited – firm rebuked for unintentional breach of conveyancing undertaking.
• Hibernian Private Client Limited – firm fined £750 for lack of notification of changes to the COLP’s details.
• Onside Law LLP – £36,517 fine for using the client account as a banking facility, where the receipt of $4m from a client was not directly related to legal advice. The COFA, Simon Thorp was additionally rebuked by the regulator.
• Martin Mannish – police station representative can no longer work for a law firm without approval, after being reported for offensive comments about transgender people and immigrants. He had received a previous warning for similar conduct.
• Jacobus Johannes Swart – South African lawyer barred from practising in English and Welsh law firms after engaging in “conduct towards a colleague that was inappropriate and/or unwanted and/or sexually motivated”.
• Rizwana Majid – fined £5,832 for six-year commercial relationship with third party referrer, which interfered with her basic professional duties to clients.
• Sunil Chumber – fined £6,345 for failing to provide a breath sample to police.
• Elliott James Legal Ltd – firm fined £3,295 for not having the correct AML documents in place until 2023.

What we do – contact us for further information about our services

• Outsourced COLP and COFA support
• New firm and ABS applications
• Independent AML audits (Regulation 21)
• Training
• AML workshops
• PII services
• File reviews