As part of a settlement agreement with the SRA, a large SRA regulated firm has been fined £232,500 for money laundering breaches. The firm has also been ordered to pay the SRA investigation costs of £50,000.

Between September 2015 and September 2018 the SRA found that the firm in question carried out serious breaches of the relevant money laundering regulations and the SRA’s rules. These included: 

  1. Failure to retain customer due diligence (CDD) for a minimum period of 5 years: The firm believed that customer due diligence was obtained for certain clients, but the firm did not retain the hard copy file of such documents and no electronic copy of the records was retained.
  1. Not all client documents were obtained: Some documents, but not a full set of CDD documents were obtained in relation to a corporate vehicle. 
  1. Failure to conduct adequate Enhanced Due Diligence, or adequately apply enhanced ongoing monitoring: Certain transactions that the firm carried out presented a “higher risk of money laundering or terrorist financing”, but enhanced customer due diligence (EDD) and ongoing monitoring was not adequately applied.
  1. The firm did not secure full CDD before each relevant transaction took place: The firm secured CDD in relation to the ultimate beneficial owner in a transaction but, because it opened each matter file in the name of a different entity in the corporate structure, the firm did not secure full CDD for each special purpose vehicle before each relevant transaction took place.
  1. No firm-wide risk assessment in place: When the SRA requested a copy of the firm-wide risk assessment the firm did not have a risk assessment in place. The practice-wide risk assessment wasn’t put in place until March 2019, and wasn’t provided to the SRA until May 2019.
  1. AML training was not carried out: A former partner at the firm rhad not received mandatory training as required by anti-money laundering regulations. The absence of training was due to personnel absence but  there was no contingency plan in place for AML training if such personnel absence occurs.
  1. Permitting the client account to be used as a banking facility: The firm accepted four payments in the firm’s client account but they should not have been permitted under the SRA accounts rules.
  1. Confusion with funds being used to discharge the firm’s fees: The firm improperly transfers funds belonging to one entity to the client ledger for another entity, which was then used to discharge the firm’s fees and disbursements in relation to the latter entity.
  1. Failure to send notifications before transferring funds out of a client account: The firm did not send a bill of cost or other written notification to relevant entities before two invoices were raised and paid out of monies held in client accounts.
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What are File Reviews? 

File reviews are a core compliance process for many law firms. They are undertaken periodically, as a way of detecting any compliance deficiencies within a client file. Whilst the precise questions involved will vary from firm to firm, a File Review will usually consider: 

  • General compliance issues, such as whether a conflict of interest search has been undertaken  
  • Cost-related issues, such as whether an estimate was provided to the client and, if so, whether any invoice issued was within that estimate. 
  • General management of the client’s matter, and whether progress has been slower than anticipated
  • Anti-money laundering (AML) risks, including checking that the client’s identity has been verified

Once compliance issues are identified, the File Review process is also a way to ensure those issues are remedied and to document any action taken. 

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The SRA standards are seven principles representing the fundamental rules on ethical behaviour that the SRA expects everyone working in the legal profession to uphold.

The principles must be upheld both inside and outside the work environment. This may also include in your private behaviour, including on social media.

With remote working, less supervision and fewer opportunities for face-to-face training, it’s never been a more important time to make sure your staff are up to speed on the SRA Standards and Regulations.

SRA Standard and Regulations: A Practical Overview covers SRA standards, regulations, and account rules, delivering the information in easily digestible bite size nuggets. The course is designed to be relevant to everyone in a firm, including fee earners, support staff, partners and in-house counsel.

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All Solicitors Regulation Authority (SRA) regulated firms have an obligation to collect, report and publish data about the diversity make-up of their workforce every two years. The next report is due on 2 August 2021. Firms can report their data to the SRA from 5 July.

What information needs to be collected?

  • Employee role
  • Age
  • Employee sex and the gender they identify with
  • Information on any health issues or disabilities
  • Ethnicity and religion
  • Sexual orientation
  • Education and background
  • Childcare responsibilities
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The SRA Standards and Regulations have been in force for 18 months. In that time, firms have had to grapple with new anti-money laundering guidelines, the challenges presented by the COVID-19 pandemic and the changes to accounts rules.

In this webinar, we will be joined by the SRA’s Policy Associates Jatinderpal Loyal and Richard Silver to look back at the last 18 months of SRA compliance and what to look out for going forward.

The webinar will cover:

  • The challenges presented by the pandemic and guidance for firms
  • A recap of the SRA Standards & Regulations and the changes they brought about
  • How solicitors and firms have taken advantage/benefited from the changes
  • How firms have adapted to the less prescriptive Accounts Rules and the key risks identified by the SRA
  • The priorities for the SRA going forward
  • How quality indicators support consumers accessing legal services
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All Solicitors Regulation Authority (SRA) regulated firms have an obligation to collect, report and publish data about the diversity make-up of their workforce every two years, and the next collection date 2 August 2021.

What is the source of the reporting requirement?

The SRA Code of Conduct for Firms in SRA Principle 6 states that a firm must “act in a way that encourages equality, diversity and inclusion”. The SRA believes that monitoring the diversity of people working in your firm will help you assess whether your firm is diverse and whether you could do more to encourage equality, diversity and inclusion. 

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In November 2016, the Solicitors Regulation Authority (SRA) abandoned its 16 hour minimum training requirement in favour of solicitors declaring themselves to be competent. At the time, mixed feelings were expressed by solicitors, including: “Will less training be carried out if there is no minimum requirement? How will I know what training to do? How should I record the activities I take part in and maintain an accurate learning record? What do I need to do in order to declare myself competent to the SRA?”. Consumers and those who protect them asked: “How can I know that the solicitor I select is well trained and competent to do the work that I require them to do? Will they do the best job possible for me?”.

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On 25 November 2019, the changes to the SRA Handbook, now known as the SRA Standards and Regulations, came into force. To help solicitors understand their requirements under the reforms, our Director of Best Practice Gary Yantin was joined by the SRA’s Policy Associate Jatinderpal Loyal to answer our audience’s questions.

Here are some of the questions answered by Jatinderpal during the webinar:

  • Do the new Principles and Code apply to unqualified employees?
  • What are the key changes to the conflicts and confidentiality provisions in the new Code of Conduct(s)?
  • How should firms stay updated on the STaRs?
  • Will there be an increase in reports to the SRA?
  • Does a notification to the firm’s insurer automatically warrant reporting to the SRA?
  • Why has the principle to “act honestly and with integrity” been separated into two principles?

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The SRA Handbook was replaced by the SRA Standards and Regulations on 25 November 2019. The SRA has worked closely with the profession and the public to develop their proposals over the last four years, engaging with more than 35,000 people. The changes are set to modernise both SRA regulation and the legal market.

The key changes to the SRA Handbook to be aware of:

  1. Reduction in number of principles – Where the previous Handbook contained 10 Principles with accompanying notes, the SRA Standards and Regulations are constructed around seven principles that apply outside as well as inside practices. The principle to act in the best interest of the client has not changed, but a new principle of honesty has been added. The onus is now on you to interpret the Principles and use your better judgement as opposed to rigidly interpreting a narrow set of examples.
  2. Separate, Shortened Codes of Conduct – The previous Code of Conduct was too long, confusing and complicated, blurring the lines between individual and entity responsibilities. Therefore, it has been replaced with one Code of Conduct for individuals, and a separate Code of Conduct for firms. This will also make it easier for consumers to understand. The separate codes will also ensure a clear distinction between the expectations of individuals and those of the expectations of firms. The indicative behaviours which appeared in previous codes have been removed.
  3. Simplified Accounts Rules – The Accounts Rules introduced by the SRA Standards and Regulations have been simplified and contain a different definition of client money. They also include rules on the use of third-party managed accounts. The Accounts Rules are less prescriptive than previous rules which were overly complex; they focus on the key objective of safeguarding client money. Firms are still required to keep client money separate from firm money and ensure client money is only used for its intended purposes.
  4. Changes to the Insurance Distribution Directive – There is a new explicit requirement that all insurance contracts proposed must be consistent with the client’s demands and needs. Furthermore, if you advise on a certain product then you must provide a personalised recommendation explaining how the product recommended best meets the client’s needs.
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The SRA Handbook is being replaced by the SRA Standards and Regulations, which will be in force from November 2019.

To help firms prepare for the new regulations, VinciWorks has released a suite of SRA Standards and Regulations courses. The courses dynamically create a personalised learning experience based on an individual’s role in a law firm. This ensures everyone taking the course will learn what they need to know, and not waste time reviewing areas irrelevant to their practice.

The new focus of the SRA Standards and Regulations is on each legal professional being able to justify their actions in all work that they carry out. For many legal professionals, including partners, managers, solicitors and support staff, this will require a significant change in approach. Legal professionals often only consider their professional obligations when a conflict of interest arises. However, the new SRA Standards and Regulations emphasise that legal professionals must be able to demonstrate compliance at all times.

The courses will help legal professionals, including support staff, to develop an understanding of the relevant SRA regulations which apply to their specific role in the law firm. The training ensures that all employees of an SRA regulated law firm who have a legal obligation to follow the SRA Standards and Regulations have sufficient knowledge to stay compliant.

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