Depending on who we grew up with we will have our favourites, and yet we adapt to change and still identify with the current actor. We recognise that tastes - and the way we identify with the lead character - change.
Now this might seem a rather convoluted way to get on to the subject of topical issues for compliance managers, but what this shows is the way we continually adapt to change and accept a new norm.
And this is vitally important for two pieces of work which will, over the next 12 months, affect all of you running a legal services firm, whether or not providing reserved activities:
They are going to be very important in setting the culture for your firm and becoming embedded in the activities of all staff. Why? Because both focus on the protection of consumers and the public and, like the Doctor, we will have our own ‘regeneration’ to do as part of this work.
The requirements of the new regulations make it even more important you are aware if the Money Laundering Regs apply to you.
Money Laundering Regs reg 12 states:
… Independent legal professional means a firm or sole practitioner who by way of business provides legal or notarial services to other persons, when participating in financial or real property transactions concerning-
( a) the buying and selling of real property or business entities;
(b) the managing of client money, securities or other assets;
(c) the opening or management of bank, savings or securities accounts;
(d) the organisation of contributions necessary for the creation, operation or management of companies; or
(e) the creation, operation or management of trusts, companies or similar structures, and, for this purpose, a person participates in a transaction by assisting in the planning or execution of the transaction or otherwise acting for or on behalf of a client in the transaction.
So, for example, if your firm is holding client money, notwithstanding that it is unregulated, then it is likely you would come under the Money Laundering Regs.
Similarly, if your firm carries out work relating to the formation of companies, which is an unregulated activity, then you must be registered for anti-money laundering supervision. For this type of legal service, you can register for supervision with HM Revenue and Customs to meet your obligations.² Supervisors are now required to supply information to a new register of all firms that carry out Trust and Company Services Provider work.
Existing CILEx authorised firms are already supervised by CILEx Regulation for their anti-money laundering requirements; however, if you are not, it is now vitally important that if you are doing any type of work which means that you or your firm comes under the Money Laundering Regs, you advise CILEx Regulation.³
As one of the anti-money laundering supervisors, we are seeking to help build a consistency of approach across the legal sector and to raise standards further. We already work within the Legal Sector Affinity Group to inform the national risk assessments, provide input on impact of legislation, contribute to external scrutiny, and submit an annual return on our supervisory activity.
The regulations provide for a new, overarching supervisory body across both the legal and accountancy sector, known as the Office for Professional Body Anti-Money Laundering Supervision. This is now being set up, and will be seeking to engage with all supervisors on how standards and approach can be raised. They will also expect us to provide a documented risk assessment of our supervised population, grouping sectors, where appropriate, so as to demonstrate a clear understanding of potential anti-money laundering risks. This is important in implementing the risk-based approach on which the regulations are founded.
This will be similar to one of the requirements for firms. You need clearly to document a risk assessment for each client, showing your understanding of the client and the transaction. That is why building it into your culture is so important.
Irrespective of whether or not you are an authorised firm, the Money Laundering Regs can apply to you...... we want to understand ideas you have about the CMA's report
The legal supervisors are already working closely on the implementation of a single piece of guidance: a request that government has made to simplify things for users. They are also looking at how they can produce some common standards for risk assessment across the sector.
The report, which was published in 2016, concluded that the legal services market is not working well for individual consumers and small businesses.4 Consumers find it hard to make informed choices about legal services providers because of a lack of transparency about price, service and quality, and some consumers do not obtain legal advice when they would benefit from it because of weak competition.
We believe that regulated firms:
We hope that the underlying principles will be embraced by all firms whether or not they are regulated. Again, it is about establishing a culture which says that the best way to engage with potential clients is be open and transparent about the services that you offer. And this is something that the Compliance Manager can encourage.
Think about how we use websites, and what information we look for. We look for information about the service or product we want to buy or use; how much it might cost; reassurance about quality; and trust in the provider that it will meet our needs, and if not how they might put it right. So, why not use your website to communicate what you offer and to differentiate your firm from the competition?
Reassure a potential client that if something goes wrong, there is a set way to deal with it. For example, they can refer to the Legal Ombudsman, or if they suffer a financial loss, there may be access to redress. You will tell a client this in a client letter, so why not use the information as a positive message to potential clients.
Similarly, how easy it is for consumers to access your services? For example, if you offer evening or weekend meetings, this might differentiate your firm, so use it to your advantage.
Think about what additional information would be useful to a consumer, for example, complementary websites or a glossary of legal terms. Even better, make sure that the language you use is straightforward and clear.
All these things are about helping to promote your business and what you offer.
We were recommended to develop new minimum standards for transparency of information available to consumers before they contact firms.
We are looking at how we can reinforce the benefits for consumers of being regulated, ie, how we can help you communicate that and differentiate yourself, and what consumer protection you have in place and why that differentiates you from an unregulated firm.
We will be consulting on the publication of such information by our regulated firms providing services to clients in relevant areas of law at the end of September. The consultation paper will be published on our website and in our regular communications.
We want your input to shape how this piece of work is progressed in a positive way that works for you and your consumers. We need to know how we can best help you make the changes which will be required. While this is obviously consumer focused, we want to understand ideas you have, which is why embracing it as a cultural change is important.
1 Legal services market study: Final report, available at: http://tinyurl.com/ycqt7veo
2 Visit: www.gov.uk/guidance/money-laundering-regulations-register-with-hmrc
3 E-mail : info@cilexregulation.org.uk
4 See note 1 5 Visit: www.cilexregulation.org.uk