25th November – How was it for you?
Last week saw the launch of the brave new world of SRA Standards and Regulations – the SRA Handbook 2011 is officially dead. Well, except to the extent that it might be a useful reference point for future compliance headaches.We’ve seen no evidence of mass panic – mild concern in places. Business-as-usual is probably the right approach, subject to knowing the important changes we highlighted last time.
Watch out for the Guidance…
It’s worth repeating that the new streamlined rules only give us part of the picture. They are heavily supplemented by official guidance on the SRA website, none of which is subject to consultation. Guidance may appear, disappear, be amended, without notice.
There are over fifty official Standards and Regulations guidance documents here.
There are thirteen Warning Notices here.
There are twenty-two relevant ‘case studies’ here.
There is a mandatory ‘statement’ of the prescribed circumstances where residual client balances can be paid to charity here.
There are nine sub-categories of ‘resources’ – each containing their own guidance materials – here.
(“And a partridge in a pear tree…”)
But, yes, technically the rulebook is 300 pages shorter…
Now this: 5th Money Laundering Directive
5MLD is due to come into effect on 10 January 2020. It will amend and strengthen the current Money Laundering Regulations (MLRs).There is a danger that many firms will have overlooked 5MLD because their attention has been taken up by the implementation of the new SRA Standards and Regulations.
Most SRA-regulated law firms (around 7,000) are already caught by the current MLRs. Having been disappointed by the profession’s apparent relaxed approach to AML, the SRA has set up an internal task force to target compliance.
This is not to be confused with the new SRA requirement to identify your client (Rule 8.1 of the Code of Conduct for Solicitors). That is a separate rule that applies to all work, regardless of whether it falls into the scope of the MLRs.
5MLD is not as big a leap as the last overhaul in 2017. Here are the changes that will be most relevant to solicitors:
- Expanding the requirement to conduct customer due diligence (CDD) on clients already known to you (e.g. when the client’s details change), and on companies and trusts (including proof of registration on mandatory beneficial ownership registers – the ‘PSC’ register at Companies House).
- Additional due diligence requirements when dealing with high risk jurisdictions – including what is known as ‘super-enhanced due diligence’.
- Reliable electronic verification systems are explicitly permitted to be used in CDD.
- More certainty over PEPs – the government is required to give us information about the PEP-worthy roles and positions.
- Increasing transparency in beneficial ownership through expansion of the registration requirements for companies and trusts, and the availability for their inspection. This will include an obligation on solicitors to notify Companies House of any discrepancies between the official ‘PSC’ register and the information held by you.
But won’t Brexit mean that the EU’s AML regime becomes irrelevant?
We now know that 5MLD will be in force before the UK leaves the EU. Looking to the future, it is hard to envisage a scenario where the UK government does not at least keep in step with the EU’s rules on AML. In fact, the Sixth Money Laundering Directive (6MLD) is due to be implemented at the end of 2020.
Is the SRA Digital Badge unlawful?
Brave soul George Gardiner has reported the SRA to the ICO, in the latest instalment of the running saga over the introduction of the mandatory ‘clickable logo’ (or ‘digital badge’). The data protection solicitor has refused to put the badge on his website, citing several GDPR violations, and in doing so has put himself in breach of the SRA Transparency Rules.It would be incredibly embarrassing if the SRA were forced to amend or even ditch the system.
On a separate point, does anybody actually believe that motivated fraudsters will be deterred by the digital badge? Wouldn’t you just create a copycat link, if you were so minded?
Have you paid your ICO fees?
Practice notes and guidance
- New Law Society practice note – Conflict of Interest
- New Law Society practice note – Residual balances
- New SRA Guidance issued on 25 November 2019 to complement Standards and Regulations*:
- Approval of employment under s41 and s43 of the Solicitors Act 1974 Here
- Confidentiality of client information – refers to information barriers Here
- Identifying your client Here
- If we are investigating you Here
- Legal Disciplinary Practices Here
- Public trust and confidence Here
- Putting matters right when things go wrong, and own interest conflicts Here
- Reporting and notification obligations Here
- Responsibilities of COLPs and COFAs Here
- Vocational training for trainee solicitors Here
- New SRA Guidance on waivers – there should be less need for this process under Standards & Regulations
- New SRA Case Studies:
*These are in addition to the guidance notes already published in advance of 25 November
- It is always important to stay on top of your cases and keep them active. Make sure you audit your files regularly – don’t wait 14 years like this solicitor. It’s not worth the £15,000 fine.
- Honesty is always the best policy, even when it is embarrassing to admit you have not covered yourself in glory. This solicitor was struck off for dishonestly misleading his clients.
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This is the last COLP Insider of 2019 (barring any breaking urgent news).
May we wish you a very peaceful and happy Christmas. However, please note this wish in no way constitutes a guarantee of such happy Christmas nor should it be considered legally binding.