SRA approve Solicitors Qualifying Examination

The SRA is going ahead with the Solicitors Qualifying Examination. Plans were approved during its 12 April board meeting.

The idea of a centralised exam attracted widespread criticism, including from the Law Society, when it was first floated in early 2016. A second consultation, on revised proposals that were generally considered an improvement, closed in January.

AML 4th Directive an unnecessary burden on Law Firms

‘Gold plated’ regulations transposing the EU’s fourth money laundering directive into UK law threaten to impose unnecessary burdens on law firms, the Law Society has told the government.

Responding to a consultation by HM Treasury on the proposed Money Laundering Regulations 2017, Chancery Lane says that small firms and sole practitioners ‘will struggle more than most to bear the cost of additional red tape’ resulting from the regulations. ‘Gold plating’ the directive could place UK firms at a competitive disadvantage compared with other EU firms, and those based elsewhere in the world after the UK leaves the EU.

The response, prepared by the Society’s Money Laundering Task Force, identifies numerous examples of what it calls ‘unjustified gold plating’. These include:

The requirement for some firms to appoint an individual at the level of ‘board of directors’ to ensure compliance – despite the fact that firms already have a compliance officer for legal practice and a money laundering reporting officer.
The extension of certain obligations to ‘agents’ in addition to employees. This will impose a ‘significant additional burden on the regulated sector’ with no additional benefit.
The obligation to apply due diligence to domestic ‘politically exposed persons’, including all members of governing bodies of political parties. ‘Given that there are over 400 registered parties in the UK, most of which are small… we think the definition in the draft regulations is excessively broad and not risk based,’ the Society states.
The register of beneficial owners of trusts. Trustees could be required to submit duplicate information. This will be time consuming, onerous and, where trustees are professional trustees, will incur associated, duplicate costs. The proposed obligation to report on events in the same tax year that they occur is ‘unworkable’.
The Society also describes as ‘unrealistic and unworkable’ a proposed requirement to provide due diligence information within two working days. ‘There are approximately 4,000 sole practitioners and 4,000 firms with two to 10 partners in England and Wales that will have many competing priorities and statutory deadlines to meet at any given time,’ the response notes. Responding within two working days ‘while continuing to meet clientss needs is an unrealistic expectation for sole practitioners and legal professionals working in small firms’.

The consultation closed on 12 April. HM Treasury says it is ‘analysing feedback

LSB wants more transparency in legal sector by 30 June

The LSB today published four outcomes it wants regulators to achieve, including a ‘step change’ in standards of transparency to help consumers understand the price and service they will receive. Clients must also have more understanding of the redress options available and the regulatory status of their provider.

The LSB wants promotion of the use of independent feedback platforms, more data accessible through comparison tools and better information available to assist consumers when they identify their needs.

On this final outcome, regulators are urged to either enhance the existing Legal Choices website and pursue alternative mechanisms such as partnering with existing websites like the one run by Citizens Advice.

But regulators are warned off creating their own accreditation schemes and reminded this is still the role of representative bodies.

The LSB said its policy is that frontline regulators should set the minimum standards required of firms, with schemes to promote higher standards left to others.

Neil buckley

Neil Buckley

Neil Buckley (pictured), LSB chief executive, said his organisation is encouraged by the ‘collective goodwill and early progress’ from regulators since December and is keen that this continues.

He added: ‘The LSB has long been clear that there is a need to increase competition in the market and a major part of achieving this will be to ensure there is better information available for consumers in relation to price, quality, redress and regulation.’

One frontline regulators have published their action plans, these will be assessed against the LSB’s preferred outcomes.

Responding to the Legal Services Board (LSB) recommendations following the Competition and Markets Authority (CMA) market study, Bourns said: ‘It is helpful that the LSB has set out its thinking on how the frontline regulators may implement the CMA’s recommendation.

Solicitor is suspended for money laundering breaches

A solicitor who transferred nearly £1.3m to an offshore bank account in Belize has been suspended for a year for breaches of the money laundering regulations and accounts rules.

The Solicitors Disciplinary Tribunal (SDT) said that by doing so, Susan Barrington-Binns “may have, however unwittingly, effectively facilitated the movement of monies during the course of a suspected pension fraud”.

The tribunal said trust in the profession was undermined “whenever a solicitor is involved in a suspicious transaction which involves the use of their client account as a bank”.

The SDT went on: “The police have not charged the respondent with any criminal offence, not have they charged the respondent’s clients with criminal offences at the time of this hearing.

“However, it is understood that a decision may be made by the Crown Prosecution Service in respect of her clients in or about the spring of 2017.”

The tribunal took into account that Ms Barrington-Binns – who was admitted in 1999 – eventually admitted all the allegations made by the Solicitors Regulation Authority (SRA) against her and its ruling took the form of a judgment on an ‘agreed outcome’ with the regulator.

An earlier attempt to have an outcome agreed by the SDT was rejected because of the lack of any practising restrictions on the solicitor once she returned to practice.

The allegations relating to breaches of the money laundering regulations centred on the receipt of around £1.3m on behalf of a client, referred to as DG, from the Cornerstone Friendly Society (CFS), which entered liquidation in June 2015 “following a police investigation into fraud and money laundering allegations regarding pension investments”.

The SDT said almost £1.27m was then transferred from the client account of Barringtons Legal to an offshore bank account in Belize “without proper due diligence as to the source of the funds”.

Ruling in SRA v Barrington-Binns, the tribunal said the sole practitioner received the money from CFS in October 2013, and recorded the following month that the client was “reputable” and there were “no money laundering issues”.

However, acknowledging receipt of the money in February 2014, the bank in Belize asked for supporting documentation on the source of the funds. Ms Barrington-Binns replied that DG had satisfied all the law firm’s due diligence for money laundering purposes.

The SDT said the solicitor should have been alert to “suspicious features” of the transaction, including that the money came from a friendly society, the CFS account statement was not a bank statement and that the money was being sent to an offshore bank account in Belize.

Ms Barrington-Binns not only failed to obtain bank statements relating to the source of funds, she “failed to obtain from DG any documents evidencing the provenance of the £1.3m” and there was no evidence she saw any documents establishing a link between CFS and DG.

The tribunal accepted that she had “genuine links” to Belize, having lived and worked there and being an attorney at law in the nearby Turks and Caicos Islands, but she was still required to have regard to the money laundering regulations.

She was found to have allowed her client account to be used as a banking facility by DG, failing to consider whether there were underlying legal transactions for the transfers of £1.27m to Belize and of £235,000 back to CFS.

The sole practitioner was “failed to be alert” to the transcation’s suspicious features, breaching SRA principles 3 and 6, and failed to have sufficient regard to the Money Laundering Regulations 2007 and the Law Society’s Warning Card.

On the accounts rule breaches, the SDT found that there had been a “substantial failure to comply” by Ms Barrington-Binns for a period of over two years.

“The accounts were not properly written up to show dealings with client and office money. That resulted in the respondent being unable to prepare proper reconciliations over that period.”

However, the tribunal said that although the solicitor failed to operate a proper client account, there “did not appear to have been any loss of client money”.

In mitigation, Ms Barrington-Binns said she had previously undertaken work for DG, she trusted him and he told her that CFS was a related company and that the money received was from the sales of property and investments.

The tribunal concluded that a striking-off order was not merited in the absence of dishonesty or lack of integrity. A suspension of 12 months would ensure that the solicitor was “meticulous in her compliance with the rules” in the future.

At the end of her suspension, the SDT ordered that Ms Barrington-Binns should be subject to conditions preventing her from being a sole practitioner, acting as COLP or COFA, or being the sole signatory on any client account.

She was ordered to pay costs of £6,000.

SRA Risk Outlook Spring 2017

Risk Outlook

Spring 2017 update

We have updated our priority risks online tool which provides an at-a-glance view of the Risk Outlook. This useful, practical resource includes trends information, case studies and tips on how to manage risks to your firm.

What is new?

Firm fined £80,000 for AML breach by SRA

Clyde & Co hit with biggest joint fine for money laundering breach

Three partners at a City of London law firm have been hit with the biggest joint fine ever handed out by the Solicitors Disciplinary Tribunal as part of a £70,000 penalty for breaching money-laundering rules.

Clyde & Co, an international law firm that specialises in insurance, maritime and aviation law, was found to have allowed a client bank account to be used as an escrow facility in 2013, which breached professional regulation.

The tribunal fined the three partners – Christopher Duffy, Simon Gamblin and Nick Purnell – £10,000 each. The rest was levied against the firm as a whole.

All three are understood to have admitted breaching the professional rules. The tribunal also found that they had technically failed to adhere to the Money Laundering Regulations 2007.

A statement from the Solicitors Regulation Authority said that the three partners “failed to heed the guidance in the Law Society’s fraudulent financial arrangements warning and/or the warning notice on money laundering, in that they acted as escrow agent in transactions on behalf of a client that had the hallmarks of dubious financial arrangements or investment schemes”.

The regulator added that the firm also “failed to have in place adequate procedures to deal with dormant client balances”.

In a statement given to The Lawyer magazine, the firm said it acknowledged that “the firm and three of its partners did act in breach of the SRA accounts rules and money-laundering regulations, which also led to breaches of certain SRA principles and code”.

It maintained that the mistakes were inadvertent and made honestly. “It is not alleged that the firm or the three partners lacked integrity, probity or trustworthiness, or laundered or misappropriated money,” the statement said.

  • The SRA has clarified the recent fine levied on Clyde & Co, the City of London law firm that was found to have breached money-laundering regulations. The firm itself was fined £50,000 in addition to three individual partners being fined £10,000 each, bringing the total penalty to £80,000. Earlier reports suggested that the total fine was £50,000.

SRA and LeO to examine how well firms handle complaints

The Solicitors Regulation Authority is turning its attention to how law firms handle complaints, commissioning its first piece of research on how firms’ processes can influence the quality of service clients receive.

The regulator announced today that the £50,000 study, jointly funded with the Legal Ombudsman, will examine if there are any issues to consider about the effectiveness of firms’ complaints processes.

The regulator said it wants to understand firms’ approaches to dealing with complaints and understand any barriers they face to handling complaints well.

Examples of good and poor practice will be highlighted. The regulator also wants to ’gain a consumer perspective’ on firms’ complaints handling.

Last year oversight regulator the Legal Services Board published updated complaints guidance for regulators.

The board, in a decision document published in July, said a review in 2015/16 suggested complaints-handling processes were not achieving the desired outcomes. ’While data shows improvements in complaints handling with some [approved regulators], other data shows that the number of “silent sufferers” remains high – those that know how to complain, but are unwilling, due to a lack of confidence that the profession will resolve their complaints,’ the board added.

The SRA’s latest research is part of its 2016/17 research programme.

According to an SRA board paper published in December, previous research exploring consumer experiences of using asylum and family legal services found that some consumers ’lacked awareness of the availability of redress and that there is a misconception that pursuing redress will have an adverse impact on the outcome of their case’.

Research companies London Economics and YouGov have been commissioned to conduct the latest research, which will involve speaking to firms and members of the public.

The research has been budgeted to cost between £50,000 and £55,000, including VAT.

LSB to look at operation of Business Oversight Board and The Law Society

The LSB said it was opening the investigation into the society’s internal governance arrangements following representations made by the SRA, which has been agitating hard for structural independence on top of the operational independence it is meant to have now.

LSB chief executive Neil Buckley said the aim was to investigate whether the Law Society’s oversight and monitoring of the SRA was “such that representative functions impaired the independence and effectiveness of the performance of the SRA’s regulatory functions, in breach of rule 8 of the LSB’s internal governance rules”.

In particular, the LSB is to review the intended role and subsequent operation of the business and oversight board (BOB), which was the main oversight link between the two bodies, and as well that of the Law Society’s ruling council, its remuneration committee and its audit committee in so far as they exercised oversight and monitoring.

Mr Buckley said the investigation would focus on the period from autumn 2014, “when [the Law Society] and SRA indicated to the LSB their intention to review the rule of BOB, up to 15 February 2017”.

He added: “Please note we do not intend to consider any activity currently being undertaken by [the Law Society] and the SRA to remedy any potential areas for improvement within the current oversight and monitoring structures, or propose solutions.”


LSB cost Solicitors £19 per year

Solicitors will pay less than £19 a year towards the cost of the Legal Services Board, the oversight regulator said today, unveiling ‘ambitious’ plans for the next 12 months. The 2017/18 business plan plan is the third and final part of a three-year strategy which has concentrated on breaking down regulatory barriers., tackling unmet legal need, as well as overseeing frontline regulators and the Office for Legal Complaints.

The board, which employs 32 people, says it hopes to reduce its indicative budget by a further £150,000 in the year. It says that  the notional cost to each person authorised to undertake reserved legal activities and holding a practising certificate has reduced from over £34 in 2010/11 to an expected amount of under £19 in 2016/17 and that this will ’continue on a downward trajectory’.

Chief executive Neil Buckley said: ’We are committed to delivering value for money and a service that helps drive the modernisation, deregulation and accessibility of legal services in England and Wales. This is an ambitious business plan in both scope and detail.’

Four years after the legal education and training review was published, and three years after publishing statutory guidance, the board says it has maintained a ‘watching brief’. It plans to increase engagement with the ‘wider’ education and training community ’to make sure we maintain a rich and broad understanding so that our approach to oversight continues to be fit for purpose and reflects best regulatory practice’.

The board said it will engage with any Ministry of Justice proposals relating to legal services regulation and with any initiatives for further reforms arising from the Competition and Markets Authority’s legal services review. It backs the authority’s recommendation to assess the sufficiency of action plans developed by frontline regulators to improve market transparency.

Research on vulnerable consumer’ experience of legal services will be published next year, which will focus on those with mental health problems or dementia.

’Large-scale quantitative’ research into the legal experiences of small businesses, commissioned in 2012/13 and 2014/15, will be updated.

As well as reviewing its internal governance rules, the board will also review regulators’ responses to its revised diversity guidance.

Buckley said: I cannot emphasise enough just how important improvements in diversity are to the future of the profession and, in turn, to the judiciary. This is an issue that has to be tackled not solely at entry level, where there is a good story emerging, we also need to make sure that action is taken to address diversity differentials in relation to progression to senior levels within the profession.’

BSB takes on ABS licensing

England’s legal profession took another leap towards fusion yesterday when the body that regulates barristers began licensing legal services businesses that include solicitor and non-lawyer partners.

The move will put the Bar Standards Board, the barristers’ watchdog in England and Wales, on par with the body that regulates solicitors. The Solicitors Regulation Authority has for several years been licensing alternative business structures, which have included solicitors, barristers and non-lawyers.

For the past two years, the BSB itself has been able to regulate “entities” that are owned by barristers and solicitors. Yesterday’s move means it will now be able to regulate ABSs that include non-lawyers.

The BSB said it was issues an updated version of its rules handbook, which sets out the position regarding ABS licensing.

“Although we are cautious about the number of ABSs that may choose to be regulated by us, we believe this development encourages further innovation in the provision of legal services,” said Oliver Hanmer, the board’s director of regulatory assurance.

“Being a specialist in regulating advocacy-based services, our announcement today allows barristers and other lawyers to partner with other business professionals to bring new skills and fresh perspectives to this sector of the market.”