Time Padding In Law Firms: An Endemic Ethical Crisis?
A recent RollOnFriday poll has revealed concerning insights into the billing practices within the legal profession. Over a third (35.5%) of surveyed lawyers admitted to inflating their time sheets, with 13% confessing to doing so regularly. This practice, known as time padding or time dumping, involves recording more hours than actually worked, raising significant ethical and regulatory concerns.
If there was ever a regulatory issue hiding in plain sight, this is it. Our regulators should be looking very closely at this issue to protect the integrity of the profession from what looks like rampant unethical behaviour.
Updated NCA Guidance On Requesting A Defence To Money Laundering Offences (DAMLs)
This updated guide from the National Crime Agency (NCA) provides crucial information for lawyers on how to request a defence against money laundering and terrorist financing offences under the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 (TACT).
ICYMI: Reflections On The SRA’s Proposal To Ban Solicitors Client Accounts
When the Solicitors Regulation Authority (SRA) first floated the idea of banning solicitors from handling client money, I must admit, my initial reaction was sceptical. I assumed, perhaps naively, that this was just a headline-grabbing tactic to draw attention to the SRA discussion paper, that lacked any real substance.
However, after delving into the review, taking part in an SRA round table event, and attending the enlightening Legal Futures session on the future of regulation, my perspective has taken quite a turn.
I have come to the conclusion that they aren’t kidding about this. Although the proposals are at their earliest stage, I am convinced that if they had their way, the current SRA management would ban solicitors’ client accounts.
ICYMI: Panel Discussion: Attacks, Hacks And Cyber-Risks
We hosted an insightful panel discussion titled “Attacks, Hacks, and Cyber-Risks”, focusing on the impact of cyber security on law firms. The panel included Chris Roberts from Cybata, Gary Horswell and Colin Fox from Ntegrity insurance brokers, and Rachael Eyre, a data protection practitioner.
Key takeaways from the discussion include:
- The current cyber risk landscape
- The importance of supply chain security
- Regulatory compliance and reporting
- The role of cyber insurance
- Future threats: the impact of AI
- Practical tips and best practices
News and Guidance
- Updated Warning Notice: Strategic Lawsuits against Public Participation (SLAPPs) -The recent update to the SRA’s Warning Notice on SLAPPs includes several significant changes:
- Incorporation of Government Definitions: The updated notice incorporates the government’s definition of SLAPPs as outlined in the Economic Crime and Corporate Transparency Act 2023. This provides a more precise legal framework for identifying and addressing SLAPPs.
- Enhanced Guidance and Examples: The new notice offers more detailed guidance and specific examples of circumstances where the SRA might take regulatory action. This includes clarifications on scenarios like the ‘right to reply’ process, aiming to ensure that solicitors understand the boundaries of acceptable conduct.
- Focus on Solicitors’ Responsibilities: It stresses the importance of solicitors being able to identify and reject instructions involving abusive litigation tactics. Solicitors are now explicitly reminded to avoid making claims without merit, pursuing cases oppressively, or for improper purposes. There is also a reiteration of avoiding misleading labelling of correspondence.
- Engagement and Casework Insights: The notice reflects insights gained from the SRA’s casework and thematic reviews. This ensures that the guidance is grounded in real-world observations and experiences.
- Regulatory Actions and Reporting: There is an emphasis on the need for law firms to report potential breaches and improper conduct.
- Lawyer Watch: Moral Remainders: What Does It Mean To Act With Professional Integrity? – In this blog post, Professor Steven Vaughan summarises his closing remarks made at the 2024 ‘Masters Lecture’. His keynote speech explores the concept of professional integrity for solicitors. He argues that integrity is a multifaceted requirement intertwined with other professional principles like honesty and independence. Vaughan emphasises the importance of solicitors recognising their agency and reflecting on the moral implications of their actions. He also discusses the challenges of maintaining integrity and stresses the need for continuous dialogue within law firms about what integrity means in practice.
- SRA: Tackling ethnicity gaps in outcomes of professional legal assessments – The recently published report “Potential causes of differential outcomes by ethnicity in legal professional assessments,” commissioned by the SRA and conducted by the University of Exeter, explores the complex factors behind disparities in legal qualification outcomes among ethnic groups. Key findings highlight influences from early education, legal education, and professional environments, as well as overarching factors like confidence and sense of belonging. Paul Philip, SRA Chief Executive, emphasised the need for collaborative efforts to address these disparities: “This is a wakeup call for the legal and education sectors to address a serious imbalance in outcomes for minority ethnic students“.
- Updated Law Society Practice Note: Consumer Protection Regulations in conveyancing – The updated practice note provides guidance on the implications of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) for conveyancers. It covers the offences under CPRs, confidentiality, the duty of disclosure, and existing guidance for solicitors. Notably, the recent Digital Markets, Competition and Consumers Act 2024, which will revoke and replace the CPRs with similar provisions, is also mentioned.
- Updated Law Society Practice Note: File closure management – This practice note outlines best practices for closing legal files at the end of a matter. It addresses the processes and procedures for file management, the creation of a file closure policy and checklist, data protection considerations, outsourcing, and client account issues.
Compliance corner – real life Q&As
“Do I have to verify beneficial owners under the Money Laundering Regulations?”
Solicitors are required to take reasonable steps to identify and verify the identity of beneficial owners as part of their client due diligence (CDD) processes. This obligation is a crucial aspect of complying with anti-money laundering (AML) regulations.
- Identification and Verification: Solicitors must identify the client and verify their identity using documents or information from a reliable, independent source, such as a passport or driver’s license. The same applies to beneficial owners who are not the direct client.
- Reasonable Measures: Solicitors must take reasonable measures to verify the identity of beneficial owners. This includes understanding the ownership and control structure of the client entity, whether it is a company, trust, foundation, or other similar legal arrangement.
- Risk-Based Approach: The extent of verification required depends on the level of risk associated with the client or the transaction. This risk-based approach means that higher-risk situations might require enhanced due diligence (EDD), while lower-risk situations might allow for simplified due diligence (SDD).
- Sources of Information: Verification can be done through various methods, including:
- Viewing original documents from trusted sources.
- Using electronic verification systems, such as Thirdfort.
- Obtaining information from other regulated entities.
- Consulting the register of people with significant control, although this alone may not be sufficient.
- Ongoing Monitoring: Solicitors must also conduct ongoing monitoring of their clients’ transactions and ensure that CDD documents are kept up to date. This involves continuous scrutiny to identify any unusual or suspicious activity.
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
Save the date: Upcoming free webinars
- 26 June 2024 (12pm): SLAPPs and NDAs – in light of the SRA’s recently updated Warning Notice, this session will highlight the regulatory and ethical implications for litigation and employment law.
- 10 July 2024 (1pm): Law firm culture and SRA requirements – we will be joined by Chris Sweetman to discuss the implications for law firms regarding the SRA’s focus on culture and accountability.
Invitations will be sent out in the coming days.
Recording: Attacks, hacks and cyber risks
Watch our panel discussion on cyber security for law firms, which brought together experts Chris Roberts from Cybata, Gary Horswell and Colin Fox from Ntegrity insurance brokers, and data protection practitioner Rachael Eyre.
The discussion focused on the growing cyber threats facing law firms, emphasising the importance of digital literacy, supply chain security, regulatory compliance, and the role of cyber insurance.
The panel provided practical tips for enhancing cyber security measures and highlighted future challenges, including the impact of AI on cyber threats.
Podcast with Jonathon Bray and AJ Fox Compliance: Inside risk and compliance
Training resources: On-demand webinar archive
Contact us for access to our extensive back catalogue of recorded webinars. Topics include:
- Financial crime: LSAG, firm-wide risk assessments, client due diligence etc.
- Sanctions
- Use of client account as a banking facility
- Data protection
- Financial stability
- Conflicts and confidentiality
- SRA Transparency Rules
- Accounts Rules
- Employee Ownership Trusts (EOTs)
- Register of overseas entities
- Sexual misconduct and solicitors’ private lives
- Terrorist financing
- And more….
We also produce bespoke training webinars, live workshops for your team and COLP and COFA training.
SRA and SDT disciplinary decisions
- Stephen Daly – rebuke for solicitor who (1) left his client without representation, failing to either come off the record or apply to the court for an adjournment; and (2) sent the other side a confidential email from the client without permission.
- Megan Murphy– paralegal removed from the profession for discontinuing a client’s claim without their knowledge, misleading the client, and subsequently misleading her employers about her actions.
- Katie Holland – rebuke following drink driving conviction.
- Joseph Tyler Grey – rebuke for trainee solicitor related to conduct requiring “several courses relating to equality and diversion (sic)”.
- Belcher Addison Limited – firm fined £750 for failing to update the SRA about the status of its COFA.
- Discreet Law LLP – firm rebuked for using money belonging to “Client A” (a charity) to pay the firm’s costs in relation to a matter for “Client B” (a trustee of the charity). The client account was also used inappropriately to receive donations for the charity and to pay the costs of an events management company, unrelated to any legal work.
- Akef Akbar – solicitor fined £5,008 for failures in managing the firm’s accounts, including overpayments and not obtaining required accountants’ reports. The SRA highlighted his reckless behaviour and the necessity of the fine to maintain professional standards, despite his cooperation and corrective actions.
What we do – contact us for further information about our services