Welcome to this week’s COLP Insider.
In this edition, we look at the themes and lessons emerging from the latest COLP COFA conference, where the SRA’s approach to humility and accountability (ahem), in the wake of the recent Axiom Ince report, took centre stage.
You’ll also find insights into the SRA’s thematic review on probate and AML training, and practical guidance on source of funds compliance. Don’t forget to read the latest consultation on client account interest (and banning client accounts altogether). Plus, our Compliance Corner tackles a common question about recording source of funds checks effectively.
Take a look at the disciplinary section towards the end of the newsletter. There have been over £75,000 worth of AML fines in the last two weeks alone. One unlucky firm supplied the SRA with largely compliant AML documents, but got slapped with a £12k fine for not being able to produce previous versions…
Happy Friday!
Jon and the team
Sorry Seems to Be the Hardest Word – Reflections on the SRA’s latest tune at the COLP COFA conference 2024
The latest COLP COFA conference highlighted a notable dissonance between the SRA’s rhetoric and the expectations of legal professionals. Despite the SRA’s insistence on having learned from past mistakes, notably their role in the Axiom Ince scandal, the defensive posture and lack of genuine engagement on these issues left many attendees seeking more sincere acknowledgment and proactive changes.
This piece reflects on the implications of the SRA’s stance and its potential impact on trust within the legal community.
You can read the full post here
SRA Probate Thematic Review: Key takeaways and what it means for your firm
Earlier this year, the Solicitors Regulation Authority (SRA) conducted a thematic review of firms offering estate administration services. While the final review is still pending publication, a preview of their findings was shared at the recent SRA COLP COFA conference. Here’s what you need to know about the SRA probate thematic review and how it might impact your firm.
ICYMI: The SRA And Axiom Ince: A Call For Accountability And Reform
“How many legal regulators does it take to fix a lightbulb?”
“Just one… but only after an independent review finds that it’s broken.”
The long-overdue independent report commissioned by the Legal Services Board (LSB) into the Solicitors Regulation Authority’s (SRA) oversight in the Axiom Ince affair has unearthed a series of troubling lapses in regulatory judgement and process.
This feels like a defining moment for the SRA, not least because the report prompted the LSB to confirm it is taking unprecedented enforcement action.
The findings of the review have led to considerable scrutiny, not only of the SRA’s approach to managing high-risk firms but also unfortunately of the regulator’s public response to the report.
ICYMI: SRA’s Thematic Review On AML Training: What Firms Need To Know
The Solicitors Regulation Authority (SRA) has published a thematic review focused on anti-money laundering (AML) training in law firms. This review is a timely reminder that training plays a significant part in regulatory compliance and risk management within firms.
As the SRA steps up its AML audit function, firms can expect training to become a key focus in future visits. Understanding the SRA’s expectations now will help firms prepare for more thorough scrutiny in the future. Here’s what the thematic review means for your firm.
ICYMI: Exploring Source Of Funds Compliance In Practice
Our latest webinar (“Practical guidance on source of funds”) tackled the challenges and nuances of handling source of funds (SoF) inquiries, an essential part of anti-money laundering (AML) compliance. Our speakers shared real-world insights, best practices, and strategies to manage the common (and sometimes complex) inquiries around SoF, aiming to boost attendees’ confidence and compliance accuracy.
For those who couldn’t join, here’s a recap of the main discussion points and key takeaways, along with a list of questions from the Q&A session and brief answers for immediate reference.
News and Guidance
- SRA | Consultation | Client money in legal services: safeguarding consumers and providing redress – The latest SRA consultation, coming out of the regulator’s Consumer Protection Review and following the Axiom Ince scandal, focuses on enhancing the protections around client money held by regulated firms.
A significant aspect of the consultation is the evaluation of risks associated with client accounts. This includes reassessing the SRA’s Accounts Rules, and indeed whether solicitors should be banned from holding client money altogether. The SRA clearly views TPMAs as a safer alternative to traditional client accounts, albeit acknowledging that the market is not yet sophisticated enough to move over to third party providers. Last week the SRA’s Chief Executive described this as a long term “aspiration”.
Some initial thoughts:
- Should the criminality of a handful of solicitors dictate such fundamental profession-wide policy?
- What message does it send to the public about the integrity of solicitors, with the regulator coming to the conclusion that we can’t be trusted to hold money?
- What does it say about the SRA’s ability to limit the opportunity for client money fraud? The Axiom Ince independent report criticised the regulator for failing to act.
- Could the SRA shoot itself in the foot? Wouldn’t a significant number of lawyers make the decision to switch regulators (e.g. to the CLC), or hive off non-reserved work to unregulated companies, outside the reach of the SRA?
The SRA is also consulting on whether firms should be permitted to “profit” from client money held on account, and other Accounts Rules changes.
Additionally, the consultation addresses the future role and capitalisation of the Compensation Fund.
This 3-part consultation represents several critical policy shifts and could fundamentally change the way law is practised in England and Wales. We suspect that there is a significant risk of unintended consequences.
Engaging with this consultation is crucial. We intend summarise and comment further, once the documents have been fully digested.
- Lawyer Watch | Blog: Lawyer Ethics: A call for action – Professor Richard Moorhead summarises the main arguments made in a recent lecture (watch here). The blog identifies systemic ethical issues in the legal profession, highlighted by the Post Office Scandal among other cases. It argues for a broader approach to legal ethics, encompassing not just professional regulation but also corporate governance and judicial practices. The author proposes establishing an independent commission similar to the Clementi Review to foster improvements in honesty, integrity, and effectiveness in law, and suggests reforms in legal education, professional regulation, and corporate governance to address these issues. Well worth a read.
- Law Society | Q&A | “A client continues to contact us about a complaint we handled. What should we do?” – There comes a point where you just have to stop interacting with the client about the complaint, but before you do, this note contains some practical advice.
- Law Society | News | Independent review finds SRA handling of Axiom Ince inadequate and ineffective – The Law Society says that the SRA failed to utilise available resources appropriately and did not act decisively to prevent or address significant issues of financial mismanagement within Axiom Ince. The criticism underlines a need for the SRA to improve its risk identification processes, enhance intelligence sharing, and strengthen its supervisory mechanisms to better protect consumers and uphold the integrity of the legal profession.
Compliance corner – real life Q&As
Q: “What is the best way to record that your fee earners have carried out source of funds or source of wealth checks? We have recently had an independent audit which identified that fee earners do understand what they need to be looking for, but the way they record it is inconsistent.”
A: We would always suggest that firms have a specific form or template that they can use to document these enquiries. Tailor it to your firm and to the type of work, clients or transactions you commonly encounter. That can serve as a prompt to get the analysis and assessment down on paper.
Source of funds analysis broadly comes down to three questions:
- is for the client to answer: how did you generate the funds for this matter?
- depends on what the client has said and what they give you to back it up: does the evidence support their explanation?
- is the broadest and crucial to your overall risk assessment: are you therefore satisfied that the funds or wealth are not criminal property?
As the first two depend on what the client tells and gives you, consider giving them some guidance. Can you categorise the more common sources of funds, ask the appropriate questions and give them some prompts as to what evidence you need?
For example, many residential purchases will have a deposit generated (in part, at least) from the client’s savings from their income. If so, guide them through some suitable questions (what do you do, what’s your average salary, how often are you paid) and tell them what you require to prove this (bank statements, payslips/P60).
Remember that any form and evidence must be backed up by your staff:
- Understanding what they are looking for
- Why they are looking for it
- Recording their assessment and their conclusions
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 session: A Seismic Shift in AML Training Expectations
Date: Wednesday, 27 November
Time: 12:00 PM (Live on Zoom)
SRA’s latest thematic review on AML training is a game-changer for law firms. The expectations for how firms manage anti-money laundering compliance have never been higher. Join us for a practical and engaging session that unpacks these changes and equips your firm with the knowledge to stay ahead.
What You’ll Learn:
- Understand the Review: Gain a clear insight into the findings and implications of the SRA’s thematic review on AML training.
- Integrated Approach: Learn why compliance isn’t just about ticking boxes—it’s about aligning training, policy, and risk assessments.
- Move Beyond Generic Training: Discover why one-size-fits-all AML training is no longer enough to satisfy the SRA’s scrutiny.
- Inspections Readiness: Understand how these new expectations will shape future AML inspections and what your firm can do to prepare.
- Examples from Practice: We’ll share real-world examples of good and bad practices to help you benchmark your firm’s approach.
This session is designed for COLPs, COFAs, AML officers, and law firm leaders looking to future-proof their compliance strategies.
Why Attend?
The regulatory landscape is shifting. This is your opportunity to stay informed, enhance your firm’s AML framework, and avoid the pitfalls of non-compliance. With actionable advice and real-world examples, this is a CPD event you can’t afford to miss.
Reserve Your Spot Today
Spaces are limited! Secure your place for this free CPD session by registering here.
Don’t just react to the seismic shift—be prepared to lead your firm through it.
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Recording: Practical guidance on source of funds (available to view for 14 days)
On 30 October we hosted an interactive webinar on one of the most crucial aspects of Anti-Money Laundering (AML) compliance—Source of Funds.
We tried to offer practical, no-nonsense advice to help you navigate the complexities of source of funds checks. Rather than vague recommendations, we focused on clear, actionable guidance tailored to various practice areas.
What else would you like us to cover in these free sessions?
Watch the recording – use passcode j*9Z6Mg2
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
- Wrigley Claydon Solicitors – £24,123 AML fine (1.6% of annual turnover) for firm without the proper risk assessments and policies in place.
- VKM Solicitors – £4,932 AML fine (1.8% of annual turnover) for firm that failed to conduct client and matter risk assessments.
- L.A.R.K Legal Limited – £6,003 fine (3.2% of annual turnover) for firm without a proper firm-wide risk assessment, AML policy, and client/matter risk assessments. The firm was found to have filed qualified accountant reports late. Residual client balances were also uncovered by the SRA.
- Hill, Johnson and Leo – £18,094 AML fine (1.8% of turnover) for firm that operated without the required risk assessments in place.
- Margetts & Ritchie – £3,828 AML fine (2.2% of annual turnover) for failing to undertake risk assessments and enhanced due diligence.
- Ratcliffes – £6,727 AML fine (1.2% of annual turnover) for sole practitioner who did not conduct the required client/matter risk assessments.
- Stamp James LLP – £12,152 AML fine (1.1% of annual turnover) for not being able evidence previous versions of its firm-wide risk assessment and AML policy.
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
