Solicitors Regulation Authority (SRA)
The SRA has published a Professional Obligations Thematic Review. As part of this, they interviewed managers and fee earners on reporting obligations, continuing competence, the SRA Transparency Rules, cybercrime, and anti-money laundering. They have also interviewed staff on their continuing competence in the course of a recent Thematic Review Of Probate And Estate Administration. We understand a family law thematic review is in progress and there will likely be others.
We highlight one issue arising from these, but they merit reading generally. The Professional Obligations review noted that ‘Although fee earners said they were undertaking regulatory training, it was routinely not recorded. In practice, more emphasis and importance were attributed to legal training.’
Meanwhile, the Probate review noted that ‘23 of 25 heads of department and all 15 fee earners completed formal training on probate and estate administration regularly. However, this training was mostly focussed on legal and technical aspects, rather than other areas of the Statement of Solicitor Competence that may be relevant to performing their role competently.’
We can assist with training on ethics, Codes of Conduct, and specific topics such as conflicts of interest, accounts and the (prohibited) provision of banking facilities. We also provide training for new compliance officers.
The SRA has also published Risk in the Legal Profession, though it will contain few surprises for many of our readers.
Anti-money laundering (AML), financial crime and sanctions
We covered the decision in the World Uyghur Congress case and the limits of the ‘adequate consideration’ exemption from criminal liability for money laundering (section 329 of the Proceeds of Crime Act 2002) in our September newsletter. Guidance is still awaited from the Legal Sector Affinity Group (LSAG). Meanwhile The Law Society published a note on 5 December 2024 saying that it believes, based on counsel’s advice, that this does not impose additional reporting obligations on solicitors. Further advice is promised.
There have been numerous press reports of the SRA fining firms for failing to have practice wide risk assessments (PWRA) or client and matter risk assessments. The fines are often far more than the cost of an audit would have been.
Of note, the allegations in most cases state that the firm did not have a PWRA when the requirement in regulation 18 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force on 26 June 2017.
It is therefore of passing interest to note that at the same time the SRA, as a supervisory authority, was required by regulation 17 to carry out a risk assessment too. However, the SRA’s first sectoral risk assessment (which regulated firms are required to take into account in preparing their PWRAs) was not published until 2 March 2018.
We provide advice and support on all aspects of AML compliance, including preparation of PWRAs, policies, controls and procedures, reporting, legal professional privilege, and audit.
Data protection, information security and artificial intelligence (AI)
There have been numerous press reports, including in The Times and The Telegraph, about Russian hackers posing as remote IT staff on Microsoft Teams. Hackers bombard workers with up to 3,000 spam messages in less than an hour, then contact the person on Microsoft Teams posing as IT staff purportedly to fix the problem, but instead gaining access to the computer and installing ransomware.
The British Library cyber incident review may provide useful background and learning on security.
The European Data Protection Board (EDPB) has adopted an opinion about using personal data when developing and deploying AI models. While not binding in the UK, it is still of some interest. It looks at when and how AI models can be considered anonymous, whether and how legitimate interest can be used as a legal basis for developing or using AI models, and what happens if an AI model is developed using personal data that was processed unlawfully. It also considers the use of first and third party data.
Professional indemnity insurance
Approximately one third of law firms in England & Wales renew their insurance in March. We are seeing more coverage disputes than in the past, and as the market appears to soften, this situation is unlikely to diminish. It is therefore critical that firms ensure they have notified all circumstances which may give rise to claims before renewal. Proposal forms may contain a declaration that the proposer has enquired of all employees, yet we frequently encounter firms asking only partners, or only fee earners, to respond; support staff may know things too and it is important to ask them (even if the proposal form does not specifically require it).
Block notification of circumstances affecting multiple clients or matters, or a particular work type (as we have seen with development schemes, ground rent, and undervalue settlement of personal injury litigation for example) requires considerable care. We have advised many firms on this and on coverage disputes.
Causes of claims should be identified and addressed. They are rarely down to a single cause. The author of Confessions of an Air Craft Pilot, Terry Tozer, observes that there are usually at least three elements coming together in an aviation accident such as communication issues, fatigue, language and culture; even professional pilots will adapt to a casual regime and allow standards to slip, or work when exhausted ‘because everyone does’ or out of fear. Lessons can be learned from other disciplines.
Engagement letters, costs and interim statute bills
Our November newsletter addressed the question of whether firms wanted their interim bills to be merely on account, or statute bills, with the consequences which flow on being able to sue on them, time limits for challenge, and generally the inability to charge for anything omitted from the bill.
In the recent decision in Topalsson GmbH v CMS Cameron McKenna Nabarro Olswang LLP [2025] EWHC 118 (SCCO), the solicitors’ standard terms provided ‘We shall bill you monthly, unless otherwise agreed. Each bill will state the period which it covers.’ It was held that this was insufficient to turn the interim bills into statute bills and they could therefore be subject to a detailed assessment despite the lapse of time. The case also decided that the solicitors were entitled to terminate the retainer for non-payment of the interim bills. The judgment contains a useful and concise summary of the principles and issues.
We have advised many leading firms on their engagement letters and terms, including limitation of liability.
For further information on professional regulation and professional indemnity insurance contact Frank.Maher@keystonelaw.co.uk or Sue.Mawdsley@ keystonelaw.co.uk.