The increasing reliance on Regulatory Settlement Agreements (RSAs) by the SRA to resolve cases of alleged misconduct, including breaches of anti-money laundering (AML) regulations, has raised significant questions about their fairness and effectiveness.
While RSAs are often framed by the regulator as a pragmatic way to achieve swift regulatory outcomes, to those on the receiving end they can be more like coercive instruments that exploit the inherent imbalance of power between regulator and regulated. This article explores the challenges and implications of RSAs, focusing on their application, impact on the profession, and potential reforms.
To explore this issue, we spoke to five leading regulatory defence practitioners: Geoffrey Williams KC, Jeremy Phillips KC, Susanna Heley, Paul Bennett and Steve Roberts. Their valuable insights have informed this article.
Why law firms need an AI policy: safeguarding professionalism in the age of legal robots
Artificial Intelligence (AI), particularly generative AI tools like ChatGPT, Gemini and Copilot, is rapidly transforming industries, including the legal profession. While the potential benefits – streamlining workflows, enhancing research capabilities, and even drafting documents – are significant, the legal sector must address unique ethical, regulatory, and confidentiality concerns. This is why implementing a clear and comprehensive AI policy is essential.
ICYMI: Seismic shifts in AML training: What law firms need to know
The SRA’s recent thematic review of AML training has set the tone for a new era in compliance. While the findings provide valuable insights, they also pose challenges for law firms trying to keep pace with ever-evolving expectations. For busy lawyers, understanding what the SRA now expects—and how to navigate these demands—is crucial.
This post unpacks the key takeaways from our recent webinar on the SRA’s thematic review and offers practical suggestions to help firms adapt.
ICYMI: Regulating By The Back Door: The rise of quasi-rules in SRA regulation
A recurring theme in recent regulatory developments is the SRA’s increasing reliance on thematic reviews, warning notices, position papers, and other informal guidance to set expectations for law firms. While these documents are intended to clarify existing rules, they often feel like new regulations in disguise, raising fundamental questions about fairness, transparency, and the future of legal regulation.
News and Guidance
- SRA | News: Accounts Rules spot check – SRA is initiating spot-checks on firms to ensure compliance with the SRA Accounts Rules, particularly regarding accountant’s reports and the management of residual client balances. This action arises from a noted decline in the number of accountant’s reports submitted annually, which may indicate compliance issues.
Background: Solicitors are entrusted with significant amounts of client money, necessitating strict adherence to the SRA Accounts Rules to safeguard these funds. Under Rule 12, firms operating an active client account are required to:
- Obtain an accountant’s report for each accounting period within six months of its conclusion.
- Submit the report to the SRA within the same timeframe if it is qualified (i.e. indicates a client money risk)
Solicitors’ Obligations: Firms selected for the spot-checks will receive an email detailing the process, followed by a January communication opening the window for information submission. Participation is mandatory.
How to respond: Here is what you will need to do in January, if selected:
- Ensure all accountant’s reports are up-to-date and, if qualified, have been submitted to the SRA within the required time frame.
- Review current residual balances and confirm that they are managed appropriately, returning funds promptly when no longer needed.
- Be ready to provide the necessary information during the spot-check process.
- LSB | Chair’s blog: priorities for 2025/2026 – The Legal Services Board (LSB) has outlined its priorities for 2025/26, focusing on key areas to improve the legal sector in the public interest.
Professional ethics will be a major focus, with consultations planned to support ethical decision-making and increase public confidence in the sector.
Consumer protection is another priority, as the LSB aims to address emerging risks such as law firm failures and the rise of third-party litigation funding, working closely with legal and financial regulators to develop coordinated solutions.
The LSB will continue its efforts to promote equality and diversity within the legal profession, enhance access to justice, and improve the effectiveness of disciplinary and enforcement processes. The proposed budget for the LSB in 2025/26 is £6.028 million, representing a 14% increase.
- Law Society | Q&A: What is a politically exposed person (PEP)? – The Law Society clarifies that chief executives of local authorities in the UK should not be treated as PEPs. That should be reserved for clients in “truly prominent” public positions.
A PEP is an individual who has been entrusted with a prominent public function, either domestically or internationally. Due to their influential positions, PEPs are considered to have a higher risk of potential involvement in bribery and corruption. This designation also extends to their immediate family members and close associates.
If you come across a PEP it requires enhanced due diligence measures to mitigate risks associated with money laundering and corruption.
- The Law Society | Adequate consideration and the proceeds of crime – In June 2024, the Court of Appeal’s decision in World Uyghur Congress v National Crime Agency clarified the limitations of the ‘adequate consideration’ exemption under section 329 of the Proceeds of Crime Act 2002 (POCA). This exemption, which typically protects individuals who acquire property in good faith and for legitimate value from money laundering charges, does not apply if there is knowledge or suspicion that the property is of criminal origin.
If the exemption was limited, it would present a significant challenge to lawyers.
The Law Society has reviewed the Uyghur judgement and, based on counsel’s advice, believes it does not impose additional reporting obligations on solicitors. Solicitors providing legal services for a reasonable fee are not considered to be engaging in money laundering, unless they are knowingly participating in such activities or providing advice for that purpose.
The Law Society is engaging with the Legal Sector Affinity Group and the UK government to discuss the implications of this decision and will keep members informed of any developments.
Focus on: The Legal Ombudsman’s annual complaints data
The Legal Ombudsman (LeO) has revealed what it considers to be persistent issues in the legal profession’s service standards and complaint handling. Chief Ombudsman Paul McFadden has addressed these concerns in a letter to the chief executives of the legal regulators, urging immediate action to enhance service quality and complaint resolution processes.
Key findings from the 2023/24 LeO data
- Volume of complaints: LeO resolved 7,918 complaints between 1 April 2023 and 31 March 2024, with residential conveyancing accounting for 33% of these cases.
- Prevalence of poor service: Investigations revealed that 69% of complaints involved substandard service, with residential conveyancing, personal injury, and wills and probate each showing poor service in approximately 75% of cases.
- Common issues: Nearly half of all complaints pertained to poor communication, delays, and failure to progress matters.
- Inadequate complaint handling: Approximately 46% of consumers experienced unsatisfactory in-house complaint handling, with residential conveyancing having the highest rate of inadequate handling at 56%.
Identified Shortcomings
- Cultural and Attitudinal Failings:
- Defensive or confrontational responses to complaints, lacking empathy.
- Non-responsiveness to complaints or failure to engage with clients and LeO.
- Misinterpretation of complaints, particularly those mentioning “negligence,” leading to refusal to address certain issues.
- Denial of evident service failings or failure to offer remedies.
- Overly technical and legalistic responses that are difficult for clients to comprehend.
- Lack of interest in learning from complaints to improve services.
- Procedural and Informational Deficiencies:
- Inconsistent and complex complaint processes that burden clients.
- Creating obstacles to lodging complaints, including providing misleading information about LeO’s role.
- Outdated or inaccurate information regarding complaint procedures.
- Setting unrealistic expectations and failing to meet stated timelines.
- Imposing unreasonable requirements on clients, such as mandatory in-person meetings.
- Neglecting to consider and accommodate clients’ reasonable adjustments.
- Improper signposting to LeO or providing unclear guidance on accessing their services.
LeO’s conclusion
LeO thinks a cultural shift is necessary within the legal profession to view complaints as opportunities for improvement. Legal regulators are being urged to collaborate with LeO to address these systemic issues, ensuring that consumers receive fair and timely resolutions to their complaints.
Practical takeaways for complaints managers
Complaints managers in law firms play a pivotal role in addressing the issues highlighted by LeO. To align with best practices and reduce the likelihood of escalation, consider the following steps:
- Adopt a client-focused mindset: Approach complaints with empathy and a willingness to resolve issues promptly. Avoid defensive or confrontational responses and focus on building trust with the client.
- Simplify your processes: Ensure your complaints procedure is clear, accessible, and easy to follow. Avoid unnecessary complexity and provide clients with accurate, up-to-date information about timelines and next steps.
- Improve communication: Poor communication remains one of the most common causes of complaints. Keep clients informed at every stage, manage their expectations realistically, and use plain English to explain outcomes.
- Learn from complaints: Use every complaint as an opportunity for improvement. Regularly review patterns in complaints to identify recurring issues, and implement changes to prevent future problems.
- Train your team: Equip people with the skills to handle complaints professionally and empathetically. Training should cover effective communication, active listening, and recognising when reasonable adjustments are needed.
- Audit your process: Regularly assess your firm’s complaints-handling performance to identify weaknesses. Ensure all complaints are properly signposted to LeO, and review the adequacy of your timelines and remedies.
Compliance corner – real life Q&As
Q: “What should we do if we realise that our website’s pricing information for conveyancing is out of date?”
A: On the face of it this looks pretty trivial. But failing to update your pricing page when fees change can lead to a breach of the SRA Transparency Rules. Misleading marketing information, even inadvertently, could be held as a breach of the Code of Conduct (see for example 8.6-8.8 of the rules). It can also result in reputational damage, complaints and potentially redress ordered by the Legal Ombudsman.
Here’s what you should do:
1. Correct the information immediately
Update your website and any other marketing materials to reflect the current charges. Ensure your prices are clearly visible, accurately detailed and are in line with the Transparency Rules.
2. Address any clients potentially affected
Ensure that current clients have received and agreed to your current costs information directly, as set out in your engagement letter or similar. If other prospective clients may have relied on the outdated pricing information, flag this to them in the engagement letter. Be transparent, apologise for the error, and confirm the correct pricing. If necessary, consider honouring the original price advertised to avoid complaints or reputational harm.
3. Review your compliance processes
Implement systems to ensure pricing updates are actioned promptly. Assign responsibility to a specific individual or team for regularly reviewing and maintaining compliance with the SRA Transparency Rules.
4. Be prepared for questions
If a client complains or the SRA raises the issue, demonstrate that you took prompt action to rectify the mistake and have improved processes to prevent recurrence. This shows a proactive and compliant approach.
5. Consider whether a self report is necessary
The SRA has consistently issued fines for non-compliance with the Transparency Rules, suggesting that a self-report may be warranted in some circumstances, depending on the seriousness. If you decide not to report the breach you should record your justification.
Contact us for a website audit
This is not legal advice. 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
Next webinar: Compliance year round-up
Join us for a comprehensive review of compliance highlights and challenges from 2024 and a forward-looking discussion on what’s on the horizon for 2025.
- When: Wednesday 18th December 2024
- Time: 12:00PM
- Where: Online (via Zoom)
This session will cover:
- Key regulatory changes, themes and trends solicitors should have been paying attention to in 2024.
- Lessons learned from SRA enforcement actions and guidance updates.
- Emerging risks and compliance priorities for the year ahead.
- Practical tips to help your firm stay ahead of the curve in 2025.
Whether you’re a COLP, COFA, or simply someone responsible for compliance within your firm, this webinar will provide valuable insights to help you navigate the evolving regulatory landscape with confidence.
Bring your questions! There will be an opportunity to submit queries in advance or ask them live during the session.
Places are limited – register now
Webinar recording: Seismic shift in AML training expectations
Missed our AML training webinar? Catch the recording!
In our recent webinar, we explored the SRA’s significant shift in AML training expectations, dissecting their thematic review and what it means for firms. We discussed why generic training is no longer enough, the practical challenges of tailoring programmes, and how these changes could shape future inspections. We also tackled broader regulatory trends, like the SRA’s reliance on thematic reviews as quasi-rules. If you want actionable insights and a peek into the future of AML compliance, don’t miss this recording!
Passcode: zUJt#iP5
This recording is available for 14 days.
Training your team: Anti-money laundering
The SRA expects that all ‘relevant employees’ practicing within the scope of the Money Laundering Regulations (MLRs) must receive robust anti-money laundering (AML) training. Now is the time to ensure your firm is compliant. Failure to meet these obligations can result in significant fines and regulatory action.
Our comprehensive AML training is designed to equip your team with the knowledge and practical skills needed to identify, prevent, and report suspicious activities, safeguarding your firm from risk. Ensure your firm stays ahead of regulatory requirements and avoids potential pitfalls by enrolling your team today.
Formats available: Online | In person | On-demand
Don’t miss out—request a free quote today!
Safeguard Your Practice: Independent Anti-Money Laundering Audit
SRA and SDT disciplinary decisions
- Anil Virji and Andrew Thomas – COFA and director fined £19,456 and £10,266 respectively for serious Accounts Rules breaches.
- Lex Sterling Limited – firm fined £11,550 for failing to keep proper books of account.
- DF Legal LLP – firm rebuked for failing to engage with a Legal Ombudsman complaint.
- Simon Roderick James – solicitor rebuked for a conflict of interest, in failing to advise a client to obtain independent legal advice about a £22k gift left to the solicitor his client’s will.
- Dennis Ko – solicitor fined £27, 500
- Sally Gandon – solicitor struck off for forging a client’s signature on a deed of severance.
- Anthony David Kerman – solicitor fined £35,280 for breaching the “banking facility rule”, in authorising significant payments from the client account which were unrelated to legal services.
- Shranks – firm fined £6,500 following AML inspection
- Jordans Solicitors Midlands Limited – firm fined £24,954 following AML inspection.
- Freedman + Hilmi LLP – firm fined £24,540 following AML inspection.
- Emerys Jones & Co – firm fined £6,592 following AML inspection.
- Paul Berg & Taylor – firm fined £21,588 following AML inspection.
- Amanda Shaw Solicitors Limited – firm fined £12,768 following AML inspection.
- Jack Fitzsimmons – paralegal barred following a supply of drugs conviction.
What we do – contact us for further information about our services
- Outsourced COLP and COFA support
- Compliance audits
- New firm and ABS applications
- Independent AML audits (Regulation 21)
- Training (online, remote, on demand)
- AML and GDPR workshops
- PII cost reduction
- Remote file reviews
- TPMAs
- Escrow accounts
- AML and sanctions searches
