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Insight

Welcome to Insight - featuring analysis on the legal sector, with expert voices from the SRA and beyond.

In this issue:

  • LEO’s Wanda Goldwag on learning from the music industry
  • Why you could be fined for a colleague’s misconduct
  • Paul Philip on why solicitors should watch McMafia
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Thinking outside The Cube

Adapting to a changing legal sector
Wanda Goldwag, Chair of the Legal Ombudsman
We spoke to Wanda about how the legal market could learn from the music industry, the importance of good customer service and why diverse teams make commercial sense.
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What’s your perspective on the legal sector?

It is a time of challenge and change. Working in the music industry, I saw its business model blown up. When I joined people bought CDs. Young people now wouldn’t know how to use one – it’s all gone digital. The legal sector might not move at the same pace as music, but the marketplace is changing. We all need to adapt.

What role is the public playing in that change?

Consumer expectations are changing. Many legal transactions never go near a lawyer. We are all used to how businesses like Ebay or Amazon resolve disputes, so we expect our problems to be dealt with quickly, cheaply and fairly.

Where does that leave the high street solicitor?

I have sympathy for them. They are under a lot of pressure. Legal aid has been cut, and they face increasing competition in areas such as probate and conveyancing.

My hope is that the sector becomes more customer focused. Some professional service bodies forget who the customer is. Solicitors are experts. They know they are doing the right thing, but they don’t always communicate that. So there will be good reasons why some work might take ten days to turn around, but the customer might not know that.

Can technology help manage that customer relationship?

Yes. For example, you see companies giving people the option to log-on to monitor progress. That type of self-service can offer the customer reassurance without taking up staff time. That is good for everyone.

Do you think there is a problem with the public being able to access professional legal help?

Large parts of society struggle to afford a solicitor. That worries me. For instance, a woman who is in a custody battle or a victim of domestic violence can find it very difficult to get legal support. And if her husband is the only earner, there can be a real imbalance in access to legal services.

Affording legal help is a widespread issue. For the legal system to thrive, as many people as possible need to access it.

How do we tackle the problem?

I think the onus is on government, regulators and society to look at new parameters for how things are done. For instance, mediation and arbitration could be a quicker solution in certain cases than going to court.

Is the sector doing enough on diversity?

Progress is being made. One of my other roles is appointing QCs. There are lot of barriers blocking women, but we are beginning to change that. CILEX is also doing excellent work to help attract more women and BAME people. We can learn a lot from their flexible approach, which aims to make training more accessible to everyone.

Diversity is not just about doing the right thing, it makes sense commercially. A leadership team made up of people who look and think like each other are likely to approach a crisis in a similar way and miss alternative approaches. Different perspectives can really help in that situation. Diversity is a force for moral and commercial good.
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Brief case

Compliance is a firm-wide issue
In January, the Solicitors Disciplinary Tribunal (SDT) sanctioned five members of the same law firm for the failure to supervise their clerk.

The five, from a solicitors in Stratford-upon-Avon, shared the burden of £32,000 worth of fines and £53,000 of costs for failing to ensure the systems in place to guard against client funds being misused were not controlled properly. The unadmitted clerk, who was employed as Finance Co-Ordinator at the firm, made improper transfers from the client account totalling over £1.6m.

The case should serve as a reminder that everyone has a responsibility to monitor what is happening at their firm. Compliance with the rules is not just a job for a compliance officer; partners should put in place the right checks and balances and everyone should be aware of them.

The SDT has a proven track record of sanctioning those solicitors who let misconduct happen “on their watch”. In 2016/17, we took 13 such cases to the Tribunal. It struck off two solicitors, suspended two others for 18 months, and issued fines to 11 individuals totalling £120,000. A firm was also fined £50,000.

As we said when compliance officers were introduced. They are not there to be sacrificial lambs – compliance is a firm-wide issue.
 
 
 
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Insight

Firms can make a dramatic difference by closing the door on money launderers
Paul Philip, SRA Chief Executive
It would be easy to dismiss the recent BBC drama McMafia, which follows Alex Godman’s descent from hedge fund manager into criminal lynchpin, as a captivating but fantastical yarn.

Yet it effectively hit home that money laundering is not a victimless crime. Behind McMafia’s world of shiny offices, sharp suits and smooth deals lies drug smuggling, people trafficking and violence. Based on Misha Glenny’s book about real life international crime, it lays bare the real costs of money laundering. It has devastating social, economic and security consequences.

Maybe it was a relief to see that a solicitor did not appear in any of the drama’s dubious activities. But the credibility of law firms does make them an obvious target for criminals. The Government has identified the legal sector as high-risk. Last summer it introduced regulations to put even more stringent demands on law firms to prevent money laundering.

Last month we published a review exploring how well law firms are doing tackling the problem and adapting to the new regulations. We visited 50 firms and reviewed 100 client files.

Our findings were generally positive. From appropriate customer due diligence to establishing sources of funds and wealth, nominating a money laundering compliance officer (MLCO) to clearly recording training, most firms were on top of the issues. And it was encouraging to see that some firms were going beyond the minimum requirements, for example through thorough testing of training and compliance.

Yet some firms are clearly doing a better job than others. Some firms were not keeping records of their decisions. Others had not made progress on putting a firm-wide risk assessment in place, which is required under the new regulations. We found a small number of firms falling seriously short.

We know the overwhelming majority of solicitors want to do the right thing. So we have published guidance to highlight key changes in the regulations. And our sector-wide risk assessment and warning notice reminds firms what they need to look out for. Signs such as overly secretive clients, high value cash transactions and clients acting through third parties.

And if firms identify suspicious activity, they should report it to National Crime Agency. There is no onus on a firm to prove that attempted money laundering has taken place. The NCA will lead on that, but good quality intelligence from solicitors is crucial to help them stop criminals laundering their gains.

Weak processes or undertrained staff can leave the door open for criminals. The actions or inactions of a few can erode trust and confidence in the whole profession. If firms fall short, we will take action.

Regulatory guidance was not at the forefront of McMafia’s anti-hero’s mind. But if we as a sector continue to be vigilant and treat the issue with the seriousness it deserves, we stand a better chance of stopping the real-life Alex Godmans.

Rigorous processes and well-trained staff is not the stuff of great TV drama. But we all have the opportunity to make a dramatic difference by making terrorists, drug smugglers and illegal arms dealers lives much more difficult.

This article originally appeared in The Times The Brief . Read the results of our review, and a range of resources to help support firms in tackling money laundering .
 
 
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They said
“The public and the profession expects solicitors to act with integrity and uphold the rule of law. And most do. Non-disclosure agreements have a valid use, but not for covering up serious misconduct and in some cases potential crimes."
Paul Philip, SRA, Chief Executive
 
 
 
 
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And finally

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