Hello, and welcome to our latest risk and compliance newsletter!
The premise of this newsletter is very simple – we want to keep you updated with key news in the compliance world. We pull together the most important updates from the regulators, Law Society, legal press etc. to save you time hunting for it. We also comment on each news item setting out why it’s important, and identify any action you need to take.
We are interested to hear your thoughts on this newsletter format – is there anything else you would find helpful? Too much detail? Too little?
SRA launches two important consultations
On 1 June the SRA opened consultations on its proposed reform of the core of its rulebook: the Principles, Code of Conduct and Accounts Rules. The new rules are a stripped-down version of professional standards. The old outcomes (which looked suspiciously like rules) and indicative behaviours (which unhelpfully muddied the waters) are gone. There is a separate Code of individual lawyers and firms – a significant step back from ‘entity based regulation’. The Accounts Rules will be simplified and focus on the real risks to client money, rather than technical breaches.
The consultations will run for 16 weeks. The new rulebook is likely to be rolled out in late 2017.
Why is it important?
Handbook reform has been on the agenda since Paul Phillip took over at the SRA. There has been a sustained commitment to a rulebook of no more than 50 pages in total – essentially taking principles-based regulation to its logical conclusion. Whatever your feelings about less prescription in rulebooks (which boils down to whether you prefer your rules to be certain or flexible), it looks like it is here to stay.
We will be pouring over the new rules to look for areas for improvement. If you have any strong views on how you are regulated, you should make time to respond to the consultation. These things do not often attract many responses, so your views will be heard. There is a specific question on whether to retain the COLP and COFA roles!
Read more here
Research suggests more to be done to improve diversity
The SRA has recently published research which, despite showing that the legal sector is becoming more diverse, acknowledges that there is much more to be done. Whilst the diversity statistics regarding gender (47% women) and ethnicity (18% BAME) are positive and encouraging, the figures still suggest that there are ‘gaps’ in the legal profession.
The regulator says that it understands that collating diversity data imposes a burden on firms, and so will now collate data every two years instead of annually. The next diversity data exercise, originally scheduled for this summer, will now take place in May 2017.
Why is it important?
Although the annual diversity survey has been dropped this year, equality and diversity is still at the top of the SRA’s agenda. In fact it is one of the regulatory objectives imposed on them by the Legal Services Act. The rationale, according to the SRA, is that a ‘profession that reflects the society it serves’ is more able to help meet the needs of people better and ensure that those wishing to access legal services can do so without concern. We can expect more diversity initiatives in the long term.
You can read more here and here
.law web domains only being used by a ‘handful’ of firms
The Gazette reports that only a ‘handful’ of law firms in England are using the new .law web domain, six months after it became available.
Why is it important?
Having the right domain name is an important factor when attracting web traffic, and can also be a valuable branding tool. With .com and .co.uk domains running out, it is becoming harder to get the perfect name for law firm websites. If your firm’s name is “ABC Law”, securing the .law domain would appear to be a relative no-brainer.
You can read more here
A new problem for ‘unbundled’ legal services?
The Gazette reports that the recent case of Sequence Properties Ltd v Kunal Balwantbhal Patel ‘pretty much kills unbundled litigation services’.
The case relates to the late filing of a bundle. Even though the client was essentially a litigant in person, reference was made to a solicitor who had assisted on an ‘allegedly limited’ retainer at an earlier point in the litigation. From here, questions arose as to whether the solicitor should have advised the client about time limits for filing the bundle.
Why is it important?
The full judgement (yet to be published) could be highly significant, particularly in offering limited retainers in litigation. However, we think it unlikely that the judgement itself will ‘kill’ anything – it seems to reiterate the point, as has been time and time again, that getting the scope of the limited retainer nailed down is absolutely crucial. We would suggest automatically raising the risk profile for unbundled matters, which could for example prompt additional supervision or partner review of the client care letter.
You can read more here
How well are you?
The SRA has launched a toolkit which focuses on the wellbeing of solicitors. ‘Your health, your career’ has been specifically put together to raise awareness of the support available to solicitors who may feel they are suffering alone or who have any concerns.
Why is it important?
The metal health charity, Mind, reports that 1 in 4 people will experience a mental health problem every year. Practising law can be stressful, and it is generally accepted that many lawyers suffer in silence. We think that it is good practice to circulate the link to the SRA toolkit to staff in order to raise awareness of the support available.
You can view the SRA’s comments here
Ministry of Justice to consult on extending ‘failure to prevent’ criminal offences
At the Anti-Corruption summit earlier this month, it was announced that the MoJ will consult on whether to extend the proposed ‘failing to prevent’ corporate offences for tax evasion, to include fraud and money laundering.
With the Financial Action Task Force visit looming, and in the wake of the Panama Papers scandal, the Government is desperate to find new ways to tackle financial crime.
Why is it important?
On the face of it, a ‘failing to prevent’ offence is potentially wider and a lower bar than the existing money laundering regime. If nothing else, it would be another route open to prosecutors looking to target the ‘professional enablers’. Result: AML checks are likely to become more important and onerous.
You can read more about this here
SRA’s thematic money laundering report
The latest review of money laundering compliance – based on 250 firms visited in 2014-15 – aimed to give the SRA a deeper insight into how well firms comply with the Money Laundering Regulations and manage financial crime risks.
The report concludes that most firms are generally ‘well set’ in their systems to manage risks and report any suspicious activity.
However, the report also highlights some notable areas for improvements. For example, several MLROs were not sufficiently trained, and were not adequately covered during work absences. It was also noted that the cost of client ID verification should not usually be charged as a disbursement, but treated as an overhead.
Why is it important?
Although it was a generally positive report, the message was to avoid complacency. How would your AML systems have stood up to SRA scrutiny? How well embedded are your AML systems and procedures?
You can read more on this story here and here