New AML EU 4th Money Laundering Directive now in force

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The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 implement the EU 4th Money Laundering Directive. The final version includes changes from a draft published earlier in the year.

Amy Bell, who runs Amy Bell Compliance and chairs the Law Society’s money laundering task force, said the new regulations repeal and replace the 2007 version and are 118 pages long.

“Whilst much of the 2007 regulations remain intact, there are some considerable amendments and additions which will take firms some time to consider and implement,” she said.

In a statement on Friday, the Treasury said the regulations would “improve the quality” of checks done on the source of money.

“They ensure that businesses can spot suspicious activity and report it, enabling the police to act swiftly and decisively to prevent corruption or terrorist attacks.”

Legal bodies have not yet published guidance on the new regulations, in light of the government’s decision that in future there can only be only one Treasury-approved piece of AML guidance per sector.

This means the sign-off process now requires the agreement of 11 legal sector regulatory and representative bodies across the UK.

The SRA said: “We expect law firms to comply with their legal obligations and are urging law firms to familiarise themselves with the new regulations as soon as possible, and take action to comply.”

In a statement, the Law Society said: “While we had hoped to have had the guidance approved and published ahead of the commencement of the new regulations, this has unfortunately not been possible…

“We recognise that many of the changes required under the new regulations will mean significant changes to firms’ systems and controls.”

It said the Legal Sector Affinity Group – a group representing the legal sector AML supervisory bodies to government, including the Law Society and SRA – has told the Treasury that “a sensible supervisory approach towards the new regulations would be to give firms and individuals a period of time to adjust to their new obligations.

“The group feels this is particularly important given the extremely short timeframe between when supervisors and those they supervise will see the final version of the MLRs and when those MLRs come into force.”

Ms Bell said a central theme of the regulations was firms needed to take a risk-based approach, meaning they need to complete a risk assessment of their practices and review their AML policies.

There were a number of practical changes firms were likely to need to make to their customer due diligence process, she said, such as expanding the list of information obtained on a corporate client to include information about its constitution, possible from review of the articles of association.

“This could add considerable time to the process,” Ms Bell said.

Another issue was a wider definition of beneficial owners, while the definition of a politically exposed person (PEP) now included domestic PEPs, and the definition has changed to include the governing bodies of political parties, and the boards of international organisations.

SRA highlights publication of Treasury money laundering regulations

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SRA highlights publication of Treasury money laundering regulations

23 June 2017

We are working on new guidance for law firms, which we aim to publish shortly, following the announcement of new money laundering regulations by the Treasury.

The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 have been published here:

Go to the regulations

We are reviewing the full detail of the requirements. We will then work with other regulators across the UK to provide updated guidance for law firms. Solicitors can also contact our Ethics Guidance helpline if they have queries.

Robust anti-money-laundering arrangements are important and a priority for the sector, law firms and the global economy. We expect law firms to comply with their legal obligations and are urging law firms to familiarise themselves with the new regulations as soon as possible, and take action to comply.

However, we recognise the short lead-in time businesses have been given to implement the new requirements. We will take a proportionate and pragmatic approach as firms take steps to comply with the new requirements.

Money laundering is a priority risk for us. Further information is available here:

Go to the AML page

PIE and PSG to merge

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Property Information Exchange Ltd (PIE), creator of the market-leading brands poweredbypie and Brighter Law, has merged with PSG Connect Ltd (PSG) to create the number one provider of legal services for the residential conveyancing industry.

David Brown, CEO of PIE commented on the merger, “PSG are a great fit for our business; they share our ethos, passion and dedication to empower law firms and help them grow within the marketplace.  We have always looked at PSG as the market leader in terms of quality search delivery, customer support, local knowledge and presence.  We are really looking forward to the many opportunities and benefits this merger will bring to all of our clients.  It’s very exciting.”

Richard Dawson, PSG Managing Director added, “It was incredibly important to find the best fit for PSG, a company that shares our ethos and one that would support our future plans.  In David and the team at PIE we have found a like-minded partner with which to grow. PIE is a market leading provider of technology solutions for the conveyancing sector. The collaboration of the two businesses will result in a significant benefit to all our clients in terms of customer service, delivery and innovative technology”.

The combined companies will build on their shared values of customer support and excellent products to provide an unrivalled service to their clients. Bringing together the best people, the latest technology and over 30 years of experience in the industry, the merged businesses look set to lead the way in the legal services marketplace.

Draft SRA Accounts Rules 2018 Published

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Draft SRA Accounts Rules 2018 Published

The draft SRA Accounts Rules 2018 were published by the SRA on Wednesday 14 June 2017 and have been reduced to just seven pages containing twelve rules.

As expected, the Solicitors Regulation Authority (SRA) has, as a result of feedback received during their consultation on proposed changes to the SRA Accounts Rules, backed down on their controversial plan to change the definition of client money.

Whilst the majority of the consultation responses received by the SRA were supportive of the aim of simplifying the SRA Accounts Rules, there was widespread criticism of their proposal to amend the definition of client money so as to exclude payments on account of costs and certain disbursements as having to be treated as client money, as it is under the SRA Accounts Rules 2011 which are currently in force.

The revised definition of client money now includes money held or received by a firm in respect of fees and any unpaid disbursements if held or received prior to the delivery of a bill for the same. In our view, the whole issue of the treatment of a firm‘s fees and the billing process is likely to require further consideration by the SRA. Rule 4 of the draft SRA Accounts Rules 2018, states that, “where you are holding client money and some or all of that money will be used to pay your costs, you must give a bill of costs, or other written notification, to the client or the paying party and this must be done before you transfer any client money from a client”. Significantly, the phrase ’properly require‘ which features in the equivalent provision in the current SRA Accounts Rules is no longer in use. It is the presence of the words ’properly require‘ that prevents a firm from transferring funds from client to office bank account where a bill has been sent to the client but the work covered by the bill has not yet been completed. This important point is not covered under the draft SRA Accounts Rules 2018 which, at face value, seem to permit monies to be transferred from client to office bank account if a bill has been given to the client for ’work to be undertaken’, i.e. a payment on account of costs.

Another significant change, perhaps inadvertent on the part of the SRA, is that the obligation to send or give a bill to the client prior to transferring costs from client to office account now applies to the firm‘s ’costs‘ rather than the firm’s ‘fees’. Critically, the definition of ‘costs’ comprises the firm‘s profit costs and disbursements whereas the definition of ’fees’, which is used in the equivalent provision within the current SRA Accounts Rules, is purely the profit cost element of the bill. Therefore, it would appear, that under the draft SRA Accounts Rules 2018, a firm will not be able to transfer funds held in client bank account, to cover disbursements paid out of office monies on behalf of the client, prior to giving a bill to the client.

The rules relating to the handling of monies from the Legal Aid Agency have changed significantly as well. Under the draft SRA Accounts Rules 2018, monies received from the Legal Aid Agency can, as is currently the case, be paid into the firm‘s office account. However, the obligation to either pay any unpaid disbursements, or transfer the corresponding funds from office to client account, has been removed. The SRA consider that removing the provision for disbursements to be held in a client account if they are not paid within either 14 days (payments received where a funding certificate is in force) or 28 days (payments received under a civil or criminal contract) does not mean that firms will be able to hold payments from the Legal Aid Agency in their business account indefinitely. If, for example, a firm does not pay an expert’s fee and thereby delays a client‘s matter, this would constitute a breach of the SRA’s rule to make payments promptly and is also likely to be a breach of the SRA Code of Conduct.

It is important to realise that we have only seen part of the story so far. Whilst the SRA have simplified and shortened the SRA Accounts Rules, they have indicated their intention to publish additional guidance on the correct interpretation and application of the proposed new SRA Accounts Rules to be read in conjunction with the new rules. So, whilst we have a streamlined version of the SRA Accounts Rules, it is evident from the list of the areas where the SRA intend to issue further guidance, that we will be gaining a substantial amount of new material which will, inevitably, end up being treated as if they were rules rather than simply guidance! The SRA have identified the following areas where additional guidance will, most likely, be issued:

  • Acting as a trustee and client money
  • What is client money
  • Name of client account
  • Withdrawals to make payments to Charity
  • Who can make withdrawals from client account?
  • Residual balances due to a client
  • Requirements to pay interest
  • Accounting records and systems
  • Accountant’s Reports
  • Record keeping around operation of joint accounts
  • Operation of a client’s own account
  • Treatment of legal aid money/monies received relating to formal appointments (insolvency)
  • Use of Third Party Managed Accounts
  • Client account as a banking facility
  • Waiver provisions
  • Out of scope monies in an MDP

The SRA have stated that the draft SRA Accounts Rules 2018 will not come into effect before the Autumn of 2018. Before then, there will be a further consultation process with the scope for additional amendments to be made before the final version of the SRA Accounts Rules 2018 are presented to the SRA Board for approval.

Download the draft SRA Accounts Rules 2018 below:

Draft_sra_accounts_rules_2018

SRA to cap profits made by SQE provider

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The Solicitors Regulation Authority is to impose a cap on profits made by the supplier chosen to run the super-exam assessment.

The regulator yesterday opened the tender for a provider to administer the Solicitors Qualifying Exam from September 2020.

The tender document reveals that the SRA intends to keep controls over the exam’s content and standards, making the pass mark subject to the approval of the chief executive. The SRA will also own all intellectual property in the SQE brand, which will be licensed to the successful supplier.

The SRA will not pay the supplier, although it may provide some funds to cover the upfront costs. Suppliers will set candidates fees, subject to SRA approval, which must remain ‘broadly stable’ and represent ‘value for money’ for the candidates paying.

According to the documents, the regulator will insist on ‘open book access’ to the assessment supplier’s accounts to determine whether fees being charged are fair and reasonable and to justify any increase. It is stressed in the tender document that the regulator is not necessarily seeking the lowest fee proposed, although there are no suggestions what the fee should be.

To ensure candidates are not charged excessive fees, any profits beyond a certain level from the SQE will be paid into a ‘re-investment fund’. The level of this cap is unspecified.

The document adds: ‘The SQE is not an income generating exercise for the SRA and we do not wish to retain excess profits for ourselves. We will decide how this money is spent either in connection with the improvement of the SQE or to provide financial assistance to candidates.’

The SRA states the exam must be a ‘rigorous, valid and reliable assessment’ that ensures newly qualified solicitors have the competences required for effective practice.

As expected, the qualification will be in two parts: a computer-based exam testing legal knowledge and a series of practical assessments.

The chosen assessment supplier will conduct its work in an ‘open and transparent way’ to help universities, training providers, publishers and employers prepare for implementation.

The SRA confirms it is prepared to work with a supplier already engaged in training – a potential conflict of interest revealed this week by the Gazette.

In response to this issue, the SRA adds: ‘We will only contract with an assessment supplier who is either not engaged in the delivery of preparatory training for the SQE or who can assure use that there is a separation of these activities to avoid any perceived or actual conflict of interest of distortion of the training market.’

The closing date for final submissions is 1 September, with shortlisted bidders notified by 1 November and a contract issued next March.

New SRA Handbook will not be implemented before Autumn 2018

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Following consultations last year, SRA are today publishing their decisions and consultation response documents.
The SRA Board has agreed:
·         New SRA Principles
Our new Principles clearly and concisely state the high ethical standards we expect of those we regulate.
·         Two new Codes of Conduct
The code for individuals sets out the professional standards and behaviours we expect of solicitors in practice. Our code for firms provides clarity on what their responsibilities are as regulated businesses.
·         Solicitors offering services outside SRA regulated firms 
Solicitors will be able to offer non-reserved legal services outside of firms overseen by the SRA or another approved legal services regulator. This will let them take the high standards, training and consumer protections that attach to their role to a greater number of consumers through new, innovative business models.
·         Revised and streamlined Account Rules
The new rules strip out unnecessary bureaucracy and focus on what matters: keeping clients’ money safe.
Extensive engagement around 11,000 people
These decisions were reached after extensive engagement with a wide range of our people and organisations, both before and during the consultation. We have listened to and responded to feedback from solicitors, law firms, the general public and representative bodies. We will continue to involve and update everyone as we move forward.
New Handbook will not be implemented before Autumn 2018
We will be consulting on phase 2 of Looking to the Future, which includes the rest of our rules and our approach to enforcement, later on this year. All of the Handbook changes will be implemented together.
We encourage you to stay involved as we work on phase 2. If you would like to discuss any of these issues, you can contact me at crispin.passmore@sra.org.uk

Law Society to pay Socrates up to £230,000 in costs

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Competition Appeal Tribunal ordered the Law Society to pay Socrates Training’s costs up to a maximum of the approved budget of £230,000.

Last month, the tribunal ruled that the Law Society abused its dominant position by requiring over 3,000 law firms to buy its own fraud training in order to maintain their Conveyancing Quality Scheme (CQS) accreditation.

The consequential order said that the Law Society “shall not oblige CQS accredited firms to purchase exclusively from the Law Society mandatory training in mortgage fraud, anti-money laundering and financial crime required for CQS accreditation”.

The society has withdrawn the financial crime module, the only one still live, as a result.

The proceedings have been stayed for two months to allow the parties to seek agreement on quantum. If this fails, Socrates has until 1 September to serve points of claim on quantum and the society then 28 days to respond.

Socrates quantified damages in the claim form at £112,500, on the basis that the society’s conduct lost it the custom of 75 law firm firms that would spend some £600 each for two and a half years.

On costs, the tribunal ordered Chancery Lane to pay Socrates’ costs of mediation, to be assessed if not agreed, up to £4,000 plus the company’s share of the mediator’s fees, and also its costs of the proceedings up to a maximum of £230,000, to be assessed on the standard basis if not agreed.

The society’s budget had been capped at £402,500, though it had originally sought £637,000.

 

AML Masterclass from Amy Bell

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AML Masterclass in London from Amy Bell Thursday 15th June 2017 at 1300

DESCRIPTION

The Masterclass is a 3.5 hour course, which looks at the requirements for the MLRO, and includes the changes which will be needed to implement the upcoming Money Laundering Regulations 2017.

The course includes:

In-depth review of the Proceeds of Crime Act, including test for Suspicion

Analysis of the proposed Money Laundering Regulations 2017 and how to prepare to comply

o Changes to CDD

o Appointment of a compliance officer

o Reporting obligations to the SRA

o Risk Assessment requirements

o New Data Protection requirements

Making reports to the NCA and understanding their responses

Horizon scanning: 5MLD and the SARs regime review

https://www.eventbrite.co.uk/o/amy-bell-compliance-13921236255

UK Visas and Immigration (UKVI) to charge £5.48 when you email the government agency

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People outside the UK will be forced to pay £5.48 when they email the government agency UK Visas and Immigration (UKVI) with an enquiry in a move that has stunned solicitors.

UKVI, which is part of the Home Office, has announced that, from tomorrow, customer enquiries will be handled by a new commercial partner, Sitel UK. For customers applying from outside the UK, as well as having to pay £5.48 for an email, all phone numbers and opening hours will change. The number of available languages will be slashed from 20 to eight.

There are no changes for people contacting UKVI from inside the UK.

UK Visas and Immigration said the changes ‘help the government reduce costs and ensure those who benefit directly from the UK immigration system make an appropriate contribution’.

However, solicitor Christopher Cole, partner and head of immigration at Rotherham firm Parker Rhodes Hickmotts, told the Gazette the ‘exorbitant’ £5.48 charge is ‘beyond belief’.

The charge will include the first email inquiry and any follow-up emails to and from the contact centre relating to the same enquiry.

Cole said: ‘Such a charge is truly shocking and wholly unjustified. In order to even come close to being able to justify such a charge, UKVI and their commercial partner will have to up their game considerably.

‘For many years there have been high levels of concern about the limited, unhelpful and often plain wrong information provided by UKVI’s international service when answering queries about an application. There will need to be exceptional improvements in the service to try to explain this absolutely outrageous charge.’

At present customers can email UKVI free of charge. The Home Office says responding to email enquiries from overseas customers, under existing arrangements, costs the Home Office a ‘significant’ amount to run.

The Home Office believes the new charge will help to make its enquiry service cost neutral. It encourages customers to check the government website for information on visa applications before phoning or emailing UKVI.

Around 80% of calls and emails are made in English, the Home Office adds. The language services that will no longer be offered amount to 4% of the calls and emails UKVI currently receives.

A person applying for a visa to join their partner in the UK must pay a £1,464 fee for UKVI to process their application, Cole points out.

He said: ‘There are often problems or delays with either UKVI’s commercial partners who take in the applications at visa application centres or with the actual decision-making process by entry clearance officers.

‘Anyone who pays such a large fee for a service should be able to contact UKVI to obtain information about the progress of their application or to raise a query about their case.

‘Surely, being contacted by email is the most efficient and cost-effective way in which to communicate about an application and this should be encouraged, but instead UKVI (via a new commercial partner) has decided to charge for sending an email.’