Legal Compliance Update

Brian Rogers

Regulatory Director

The Access Group provides the latest legal compliance news.

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Legal Compliance Update - December 2021

In addition to the usual areas covered in our updates, this month’s update provided an insight into two of the key topics covered during the Solicitors Regulation Authority (SRA) Annual Compliance Conference.

Anti-money laundering

The SRA has suggested that firms should provide money laundering compliance (MLCO) and reporting (MLRO) officers with more time in which to fulfil their obligations, and to appoint deputies to relieve some of the pressures encountered by them; it found that 46 out of the 54 AML officers contacted had fee earning roles and that of these only 15 had reduced billing targets, and that 28 officers did not have a deputy!

An example of good practice was identified in one firm, and it is highly recommended that other firms follow suit – the firm in question had agreed with its fee-earning MLCO that they would record both chargeable time and “accountable time” on work which was not billable but benefitted the firm; both types of time went towards the officer’s monthly time recording targets.

Of interest was the SRA’s view that in all but the smallest firms, holding one or both AML officer roles without any adjustment to case holding and/or other duties is unrealistic; you have now been put on notice!

A key comment made by the SRA is worthy of remembering, “we expect that the MLCO will take their role as guarantor of the firm’s AML compliance seriously”; but they can only do this with the ongoing support of their firm!

The Office for Professional Body AML Supervision (OPBAS) has reported that there are “differing levels of achievement and some significant weaknesses” among the UK’s legal regulators in their approach to anti-money laundering, so the focus on AML is unlikely to shift anytime soon!

Comparison Websites

It was interesting to hear a representative from one of the main comparison website providers speak at a break-out session, and to hear their answers to our questions around how firms were ranked; we provided a number of examples where firms with lower quality scores had been ranked higher than firms with higher quality scores:

  • Example 1 - Firm A was ranked #5 with 95% for value for money/100% would recommend the firm/97% was happy with the outcome, against Firm B ranked #1 with 94%/95%/94% respectively

  • Example 2 - Firm A (17 reviews) was ranked #624 with 2* against Firm B (129 reviews) that was ranked #1213 with 4.5*

Unfortunately, no real clarity was provided around the ranking of solicitors as described above, apart from the fact that it may have been due to the age of the reviews left; my issue here is that rankings are supposed to reflect the quality of service received not when a review is given!

It was also said in response to another question from the floor that firms were not ranked in alphabetical order, however, evidence from one site shows this not to be the case. A further concern that was raised from the floor was that firms that paid a subscription fee were being ranked higher than those that had used the free service; it was stated from the panel that this was not the case, and an example was given showing a non-subscription firm being ranked higher than a subscription firm.

Since the conference I have been told by a firm using a comparison website that when they were setting their account up they were told by the website company that they could provide up to 50 reviews they had already received as part of their own internal quality monitoring process in order to provide an initial ranking; I suspect most, if not all firms being given this opportunity would only provide positive reviews but that may just be the cynic in me!

As I said at the conference, comparison websites are a good idea in principle, but they must provide a fair reflection of a firm’s performance, but this can only be achieved if there is full transparency around how they are ranked.

Have a nice festive break!

2022 is likely to see similar challenges to those faced in 2021, but as usual we will be here to assist you with meeting these, so please let us know how we can help.

We wish you all a very Happy Christmas and a prosperous New Year!

Watch the December Compliance Update Webinar on demand now.

Legal Compliance Update - November 2021

This months’ update covered a number of key areas that could have an impact on firms, so they need to consider what, if any, action they need to take going forward.

PII cyber clause

The Solicitors Regulation Authority (SRA) has approved a new cyber clause and is now with the Legal Services Board (LSB) for final approval; the Council for Licensed Conveyancers (CLC) has already had its clause approved by the LSB so firms wanting to see what the new SRA clause may look like can view it on the CLC’s website.

Firms that already have separate cyber cover in place may want to speak with the insurer to see what, if any, impact the new clause may have on the policy, for example, does it duplicate any cover.

Council for Licensed Conveyancers Annual AML Report

CLC firms need to read the report and make any appropriate changes to their firm wide risk assessments and other policies, systems and procedures; non-CLC firms that do conveyancing may want to read it to see what property-related risks have been identified.

Employee resignations

A recent survey found that 25% of employees are looking to change job in the next 3-6 months, with 70% of these hoping to move job in the next two months; although those in the legal sector said they were the least confident about getting a new job, law firms need to assess the impact staff turnover could have on their operations going forward.

Property theft

A recent case has shown how a property can be stolen from under the nose of the owner who is not living in it, and although investigations into how the fraud was able to happen firms should be pointing clients towards the free HMLR Property Alert Service; CQS firms are required to advise clients to do this under the CQS Protocol but it may be the requirements needs to become mandatory as a way of reducing such frauds in the future.

Email interception fraud

A homebuyer was recently scammed into handing over £640,000 after emails to their solicitor were intercepted, so firms need to ensure they advise their clients of such risks; where firms have been targeted PII insurers can reserve their positions on paying claims if it can be shown they didn’t take reasonable steps to reduce the risks of such frauds from taking place.   

Workplace culture

Yet another survey (Culture Shift) has found that the legal sector is “one of the worst across the board” for workplace culture; compared to other sectors, it was found to be particularly bad for employees leaving jobs because of a poor workplace culture and saying a negative culture had damaged their mental health.

The legal sector came out worst in three further related areas with half of legal employees (50%) saying a bad workplace culture had impacted their productivity, 38% said they were “less engaged with their job due to the company having a bad culture”, and a third “wouldn’t share their concerns in employee annual surveys”.

Crypto currency dangers

Although the use of crypto currencies is still in its infancy in the legal sector, firms need to be aware of what they are and the dangers that can come from them, for example, a cryptocurrency launched with the branding of hit Netflix series Squid Game has disappeared from the web, leaving investors out of pocket.

Our upcoming webinar, “Introduction to Crypto-Currencies and Blockchain”, will provide attendees with an insight into how firms and their clients could be at risk.

Watch the November Compliance Update Webinar on demand now.

Legal Compliance Update - October 2021

SRA thematic reviews

During our recent Access All Areas legal panel session the Solicitors Regulation Authority was asked what thematic reviews it was planning to carry out over the next 12-18 months, and although it said these had not yet been fixed in stone they could cover:

  • Law firm culture
  • Immigration work
  • Powers of attorney/deputyship work
  • Mental health work
  • Issues related to the performance of the Legal Ombudsman – law firm complaints handling

Transparency

The Legal Services Board has demanded further action from underlying regulators like the SRA, this includes clamping down on firms not doing enough to give clients information; the LSB has said that it will expect the SRA to have regard to performance data – such as error rates as well as complaints, and client feedback, ratings and reviews.

Complaints costs

The Council for Licensed Conveyancers is planning to make CLC regulated firms who attract the most complaints pay more towards the Legal Ombudsman costs; it would strip out these costs from practice fees and make recharges to firms based on their complaints data. An area of concern for firms will by how the CLC put data into context, for example, it is likely that bigger firms handling more cases are by nature likely to attract more complaints.

Legal Ombudsman

A recent meeting between government and regulators discussed what plans should be put in place should it be decided to disband the LeO; no decision has yet been made on the future of the LeO but it is interesting that this is now being discussed.

Are law firms really hostile places for legal executives?

A major survey carried out by the Chartered Institute of Legal Executives has found that legal executives, many of whom come from non-traditional backgrounds, face discrimination and unfair treatment by fellow legal professionals and particularly their employers, which denies them equality of opportunity.

Fraud and cybercrime

Bank account fraud is now tracking at it highest level for more than three years, with ransomware demands having increased by 518% between 2020 and 2021.

Apple has issued an emergency software update to counter a new form of spyware that does not require the user to click on anything; clearly those using Apple equipment should action the update as soon as possible so they are not exposed to attack.

Law firm cultures

The “organisational culture” of the legal profession needs to change to tackle the ongoing problems of mental ill-health, bullying and harassment, major new research carried out by LawCare has found.

Just over one in five participants (22%) said they had experienced bullying, harassment or discrimination in the workplace in the 12 months before completing the survey.

The research also highlighted the intensity of work many faced: almost two-thirds felt they needed to check emails outside of regular work hours to keep up with their workload, and 28% said their work required them to be available to clients 24/7.

Watch the October Update Now