SRA Compliance Updates Header

New rules and guidance from SRA

Anti-money laundering (‘AML’) – SRA priority risk

Updated AML Guidance has now been published by the Legal Sector Affinity Group (LSAG): Though a long document, it is most likely essential reading at least for the compliance team / MLRO / MLCO. There is a very useful checklist at the beginning. In terms of the key changes, here is a summary of the changes we have made to our standard templates:

    • To add an ‘adverse media check’ to the file opening / matter risk assessment form. Given what we have seen from the SRA in this area we would strongly recommend documenting a quick Google search for clients when beginning to work with a new client. This can be valuable and many do it already;
    • Conducting criminal records checks (Disclosure and Barring Service) on new starters at least. This is not mandatory, but increasingly is becoming common practice. In bigger firms and those doing higher risk work it may also be prudent to repeat the checks periodically;
    • Move towards annual AML training rather than every two years as previous guidance had indicated – a lot of firms forget that AML training is mandatory if you are caught by the regulations;
    • Adding additional checks to the risk assessment to confirm the firm is not involved in especially high-risk / high-value items or business, such as rare art or diamond or ivory traders, nuclear proliferation, cryptocurrency providers, gambling, tobacco products etc. as well as international procurement or public work contracts;
    • Repeating client ID checks if more than 12 months has passed since they were last completed and it is an ongoing client;
    • Procedures for electronic ID verification providers being required to be signed off by the MLRO / MLCO before being used in the firm
    • Expanding the matter risk assessment title so as to make clear it is an assessment of both client risk and matter risk i.e. change of title of the form;
    • Adding a greater number of risk factors to the matter / client risk assessment form in keeping with the expanded guidance;
    • Adding a check to matter risk assessment to confirm fee earner understands source of wealth i.e. how the client makes their money and some expanded options in source of funds for business entities;

For clients working with us on a retainer basis we will be in touch separately to offer help with reviewing your procedures. If you subscribe to our templates etc. and would like to see a tracked changes version of our latest procedures then do get in touch.

SRA cracking down on registration under Money Laundering Regulations for ‘tax advice: essentially they are guiding that if a firm tailors advice in any way to a client about their individual tax position then the firm should be registered for this purpose under the Money Laundering Regulations. It has thrown up some issues for employment law firms and we have a briefing note available on this we can share separately if this would be of assistance, just get in touch;

SRA conducting more spot checks on AML procedures in law firms. We have seen letters from the SRA requesting information in order to assess randomly selected law firms’ procedures on AML. They ask for the procedures and then files to review the procedures are being met in practice. No time like the present to check that everything is operating well in practice. If you want to combine this with an independent audit as required by the regulations and want some support with this again do get in touch.

Cyber crime – SRA priority risk

The SRA has published a warning that a number of scammers are impersonating the SRA itself:

  • In the first 6 months of 2020, cybercriminals cost solicitors £2.5 million and there was a 337% rise in phishing scams during first two months of lockdown
  • A solicitor who accepted email instructions from a hacked email account to send sale proceeds of nearly £300K to a fraudster was fined £10k by the SRA
  • SRA is pushing for cyber insurance cover to become a minimum term for solicitor’s professional indemnity insurance;
  • Remember:
    • Be very wary of attachments or links you are not expecting – we have seen malicious attachments on LinkedIn now too
    • You cannot trust a link’s title, an email address (particularly that of your boss! So called CEO frauds) or a phone number – they can be spoofed
    • Get IT support on your IT security if a small firm e.g. two factor security, VPNs, spam filters, back ups, patching etc etc
    • Partners – check you’re insured for cyber and train staff on the warning signs

Quality of solicitor services – SRA priority risk

This issue is a hot topic at the moment, including potential for the oversight regulator to pursue some more drastic continuing professional requirements such as having to ‘revalidate’ the solicitor qualification periodically. In the meantime the SRA have published an interesting checklist on ensuring quality of legal work and we have included these in our own checklist below:

  • Is your firm auditing files for quality of the legal work?
  • Are you certain clients know how long this could take and how much it could cost? Delay and cost are two of the most common complaints according to the SRA, manage expectations carefully and don’t be afraid to talk about money.
  • Will you be able to operate okay if someone is unexpectedly unavailable?
  • Is there a culture of learning / ‘no blame’ culture in the firm?
  • If you are relying on technology, what human checks and balances do you have?
  • What happens before the client gets to you? Are clients in the loop with who everyone is and able to make an informed choice about how to proceed?

Hot topics – SRA marketing rules

There’s been some confusion recently about the SRA’s new rules on marketing. To be clear, the SRA has not banned advertising or responding to requests for help on social media (though take care not to inadvertently create a retainer!). The rules have not changed as drastically as people think:

  • Don’t cold call individuals – businesses sit outside of the SRA ban an unsolicited approaches however (according to the Ethics team anyway);
  • General advertising is fine;
  • Businesses are not members of the public – so LinkedIn is definitely not a problem whatever you do (within reason!)
  • It does not seem to take much to fall outside of the ‘unsolicited’ category – so replying to someone asking for help on social media won’t be a problem in terms of this rule
  • Cold invites and messages on LinkedIn appear to be acceptable
  • SRA’s focus is on whether something is intrusive
  • Remember publicity must not be misleading or inaccurate
  • Remember to comply of course with data protection and privacy and electronic communications rules

Tribunal trends and cases of interest

  • A junior solicitor who was struck off for lying about the whereabouts of a case of papers while she attempted to recover it has won a re-hearing of her case for further consideration to be given to the impact of her mental health during the period in question.
  • A lawyer who implied that criminal proceedings may follow if the opponent proceeded to testify against their client has been banned from working in law firms for a lack of integrity. The concern was that she had attempted to prevent the Court from hearing evidence in an improper manner;
  • Two partners have been fined for charging clients a separate fee for their professional indemnity insurance as if it were a disbursement rather than an overhead of the firm. The partners were also criticised for charging varying fees for completion of a very simple form;
  • A solicitor has been struck off after telling her new firm she had a clean slate when she was under investigation.
  • Two solicitors have been struck off for making dishonest statements to their respective clients about the progression of cases and placing the blame on support staff.
  • A solicitor has received a rebuke after being cautioned by the Police for an assault on a family member.
  • A solicitor who ordered secretaries to retrospectively “witness” wills has been struck off;
  • A solicitor has been fined for, among other things, fly tipping legal documents which included client information;
  • A solicitor who acted for buyer and seller in property section has had the transaction set aside by the High Court due to undue influence and subsequently fined by the Solicitors Disciplinary Tribunal (SDT) for acting in a conflict of interest. Remember that the starting point in property transactions is that acting for a buyer and seller will be a conflict of interest. There can be exceptions but this would not ordinarily be the norm.

Important information about these updates

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