Compliance in any legal organisation is about managing and avoiding risks whilst complying with applicable laws and regulations. It really is vital that all employees conform to a business culture that understands and respects the compliance culture and that means supporting your whole finance team. If you’re a sole practitioner and outsource to a legal cashier - please carry on reading - you are easily targeted especially practising as a private client or property lawyer.
Firms, as well as individuals failing to comply, can face significant problems from being targeted by criminals, to receiving fines and perhaps even worse - being struck off all together! And let’s not forget the shame and bad reputation - we all know consumers are savvy and B2B are merciless!
Protecting your clients with legal compliance knowledge
Law firms get worried when they feel they’re going to receive bad press or gain a bad reputation, so, not to scare monger, but protecting your clients with legal compliance knowledge is crucial in maintaining a first class business (legal or otherwise).
The regulatory environment is ever changing (what isn’t these days?!), therefore the team or person that heads up compliance must keep pace with changes and alterations of the regulatory authority.
As with any client relationship, the client has a right to complain or be unhappy with services provided. Therefore, it is our duty to make sure this doesn’t happen, and, if it does, we’ve got to ensure complaints are kept to a minimum, and most definitely put your hands up ASAP to see if this can be sorted quickly.
This is why legal compliance knowledge is so crucial in benefiting legal firms and all their staff but especially their cashiers, bookkeepers, accountants and you, if you’re the COFA.
That’s why at ILFM we know from experience it’s important that we train, support and qualify individuals in legal finance and management so they feel comfortable and confident to ask questions and learn throughout the whole process, including these uncertain times. Everyone that’s been trained by us always achieves the best for their practising colleagues, which in turn helps their clients, whilst of course, maximises the financial return with their yoda-type knowledge!
Common Compliance Problems
We are all aware of the most common compliance problems including:
- Failure to meet deadlines
- Attempting to delaying deadlines
- Banking client money
- Negative interest rates
Quite frankly - we’re all human and we all have bad days in the office (or of course….working from home)!
The best way to deal with these common compliance issues is to do everything you reasonably can to comply with rules and regulations whilst keeping clients’ money safe and separate from the firms’ accounts.
Communication has and always will be key in maintaining client relationships, as long as you are open and honest and don’t try to hide mishaps from your client or company, all will be okay in the end!
Equally - only update clients on problems if they actually need to know about it! If a common issue arises that can be dealt with internally - do this and do it fast!
Coronavirus and Legal Compliance Issues
Will we ever stop talking about the coronavirus?! Probably not. Coronavirus has had an impact on compliance itself, by altering the way businesses approach compliance.
Less than a quarter of legal firms believe that their compliance systems are as effective as they need to be, which creates a deficit in financial return. Although the coronavirus is slowing certain processes down and causing these issues, it is important to remember that most processes have been hit by the coronavirus and people are understanding of this issue, so - don’t beat yourself up!
With law firms amongst the highest at risk of exposure to money laundering, terrorist financing and financial crime, there is constant pressure to have your eye on the ball! Yes the accounts need to be balanced, the VAT needs working on, the debts need recovering but finance accountants have to be so vigilant all the time too.
As you’ll no doubt be aware, the types of legal services at the highest risk of attack are:
- Company services
The other classics evidenced are:
- Sham litigation; and
- Fraudulent investments
Cyber criminals just love a client account and it’s always the legal cashiers and their finance and accounting colleagues dealing with the transactions of these above departmental cases- no pressure!
By no means does ‘high risk’ mean that professionals working in these sectors are likely to be criminally or negligently involved in money laundering, it simply suggests that high-end money laundering almost always requires facilitation by professional services, which is why compliance and risk assessment services for legal finance professionals is so key. I think, sadly, we’ve all known or heard of someone in the area of law who’s been struck off from falling into a clever fraudster’s hands.
Although the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 improved technical compliance, there is more work to be done as a minority of legal services providers still fail to prioritise AML compliance and understand its risks.
The SRA is trying its best to support those firms by working on transparency and open door policy, but again, it’s up to the service provider to use their initiative and not cut corners.
Why Compliance and Training Boosts Your Legal Business
The role of a COFA is an integral part of the move to outcomes-focused regulation and the key to the SRA’s aim that firms must take responsibility in managing risk to delivery of their legal services.
It really is vital that the COFA is confident in managing a team (or if they’re a SP, just feeling confident themselves!) whilst being approachable and open to the learning team in supporting them in their training. We know this and work with so many COFAs - which is why we have more products, training and support specifically for a COFA.
Training help is often dependent on the size of the firm, its individual areas of risk and the type of work within their client base. The benefits reaped by compliance training is that your legal business will run like a well oiled machine! Having expertise in a specific area, which is taken care of by a specific team, is invaluable; at a time like the present when business is ever changing, especially digitally, it’s crucial to stay in the game by ensuring each area is covered.
Although as a COFA you are not solely responsible for compliance with Handbook requirements, you must support and manage your team in finance by ensuring accounts are up to date in regards to SRA rules, whilst avoiding any possible breaches along the way. If the staff of a law firm have that support, then each individual in that firm has a subsequent role to play in complying with Handbook requirements. Conclusion, they’re not completely left hanging out to dry on their own!
The COFA is alert in detecting areas that would be of concern to the SRA which is why we, at ILFM, help train and qualify legal finance teams, including the COFA, to ensure that we guide all your colleagues with best practice and assured guidelines.
Alongside this, ILFM’s membership (which is cheaper than a returning holiday COVID test these days!) includes such training and resources including COFA workshops and access to other COFAs.