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Managing Risk and Learning from Mistakes

As legal professionals, it is crucial to manage the risks we face daily and learn from our mistakes. The common goal of most professionals is to prevent messes in the first place. Building Compliance That Works is fundamental to being able to demonstrate resilience and self-reflection on internal policies and procedures.

In the legal sector, professional identity insurance has seen a significant increase, with some firms experiencing a minimum increase of 20% in their annual premiums. To combat the increase or limit it, it is essential to prepare early, not treat it as a tick box exercise, utilize a specialist broker, demonstrate that the taint has been removed, put in the work and time to the process, demonstrate your firm’s value on the proposal form, and have a standalone document.


We all have problems, things which haven’t gone to plan, so how do we explain them?

If a problem is identified, Root Cause Analysis should be conducted for each instance. The purpose of this is not to blame a person but to investigate the different factors that enabled the incident to occur. In doing so, effective changes and prevention can be implemented to limit recurrence.

It is essential not to merely scratch the surface and dig down below to find the root cause. If the root cause is missed, the incident is likely to occur again, increasing the risk exposure. Human error is never the ultimate root cause, and firms or individuals should not feel ashamed in near misses. Instead, they should feel confident and empowered to share these experiences with others.


We worry people will fear it is a witch hunt if we dig too much into the issue.

Creating a positive environment to have these chats and building a safe environment where staff are confident that they will not be judged or penalised for asking for help or alerting a person to an underlying issue is crucial. Ensuring that the culture is embedded throughout the firm sets the right undertones for all staff, regardless of level or position.

Risk is there, through firms at all levels, and risks may change, but they are still present. Consider reporting lines or lines of support, whether internal or external. In most firms, the line manager automatically handles reporting lines, which can make people bury their heads and not speak out for fear of repercussions, insecurity, stress, and compromised decisions.

It’s important we face these causes, because without it people suffer. In many parts of the legal sector, (for example Conveyancing in 2022), there can be real risks that are exacerbated due to several factors outside the staff member’s control and, in some instances, the firm’s. Even if those risks do not transpire into meritorious claims, it is inevitable that there will be claims and complaints arising out of these risks, which will have a considerable impact on staff and firms.

Everyone, at one time or another, will make mistakes within their careers, and it is how we deal with them that helps shape our careers and share the firms we work within.


How can we mitigate the consequences of issues arising?

Make it easier to find out what actually went on – Recording file notes is essential, documenting what is done at each stage, what has been found, what the client has been informed of, when they were informed, and by what means, and why the matter cannot proceed further.

Supervise properly – In the remote world we currently operate within, identifying signs in others is crucial. If you are a supervisor, think about how to monitor, motivate, and supervise daily. Remote working adds another layer of complexity, making identifying a gut feeling a lot harder. Make a conscious effort not to focus solely on the work and be visible and personable, building trust and relationships.

Use your data – Data collection and analysis can help fill gaps and identify where and who requires support. Data that could be considered includes low WIP or alternative high WIP, money held on the file, inactive client records, average case length, non-billing for a period, what happens when the file gets to 75% of the fee estimate, and retainer profitability and written off time.

Taking action if you think there might be a problem – doing more file reviews, and stacking the odds in your favour is invaluable regarding risk exposure and learning. Get curious, ask why, and continue learning about your team and how they operate.

Economic Crime (Anti-Money Laundering) Levy

With all that is going on at the moment, its quite likely that you are not aware that the Government has introduced the Economic Crime (Anti-Money Laundering) Levy. This previously mooted levy, by way of the Finance Act 2022, achieved Royal Assent on 24th February.

What is the Economic Crime (Anti-Money Laundering) Levy?

The Government has stated:

‘The Economic Crime (Anti-Money Laundering) Levy (‘the levy’) is part of the government’s wider objective, outlined in the 2019 Economic Crime Plan (ECP), to develop a long-term Sustainable Resourcing Model (SRM) to tackle economic crime’

The levy aims to raise £100 million a year from the AML regulated community to help fund new and improved AML capabilities. The NCA for example has been struggling to cope with all the reports it receives. Extra funding aims to address such problems.The first levy year is almost upon us, as it will run from April 2022 to March 2023, with relevant levy payments first being collected in April 2023 (i.e., payment in arrears). It will not be collected by all AML supervisors with only the Financial Conduct Authority, HMRC and the Gambling Commission being tasked with these duties. For the legal sector (and Accountants too) the HMRC will collect it.When you next plan your budgets, don’t forget to take into account the fact that as of April 2023, you may well be paying this levy in addition to all of your other overheads:

  • the levy is to be charged on a fixed fee system, based upon your UK revenue
  • it will be paid by medium, large, and very large AML-regulated entities
  • small entities (those with UK revenue below £10.2 million) will fortunately be exempt.

An entity is classified as:

  • medium if its UK revenue for the relevant accounting period is more than £10.2 million but not more than £36 million
  • large if its UK revenue for the relevant accounting period is more than £36 million but not more than £1 billion
  • very large if its UK revenue for the relevant accounting period is more than £1 billion.

The levy is to be charged as follows:

  • medium entities will pay £10,000
  • large entities £36,000
  • very large entities £250,000.

In addition to the levy itself, the Government estimates that it will impact an estimated 4,000 businesses, who will need to self-declare their levy status (i.e., whether they are AML regulated, and their UK revenue during the period of accounts that ended in a said financial year) to their relevant collector or be invoiced by their collector. The relevant collector (HMRC, the FCA or the Gambling Commission) for businesses will be the collector that already regulates/supervises them under AML Regulations, so the majority of firms will have an existing relationship with their collecting body.

The exception is c.450 firms who are regulated/supervised by the Professional Body Supervisors (PBSs), who will need to declare their status and make their levy payment to HMRC.The government is to issue centralised guidance on gov.uk that sets out the process for paying the levy in due course.If there are any burning questions or issues you want to discuss we are always available. In the first instance please get in touch with hello@tealcompliance.com.


Simon Harbord

Team Leader, Teal Compliance Limited