Legal Compliance Blogs | Teal Compliance

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Launch of our brand new compliance training technology, Teal College

Anti-Money Laundering, Blogs, Legal Compliance, Risk Management / Joanne

At Teal, we’re thrilled to launch our brand new compliance training technology, Teal College! Find out what Teal College is, and how it can benefit your law firm.

What is Teal College?

Teal College is home to all the compliance training courses that we write and deliver.

From new starter training and staff needing to update their knowledge, to specialist training for those wishing to become a compliance officer, there’s a full curriculum for everyone in a compliance year to get the training they need.

Teal College is available for anyone with the Teal Tracker, or can be subscribed to as a stand-alone product.

What compliance disciplines does Teal College cover?

Teal College is home for all of our compliance courses, which are split into three disciplines:

AML Compliance
Regulatory Compliance
Data Protection Compliance

You’ll never need to worry about staff falling behind in these areas with our courses, as you’ll have all the training you need at your fingertips.

What other courses are available on Teal College?

Teal College doesn’t just have training courses in the three compliance disciplines. Users of Teal College can access learning on a wide variety of subjects not just compliance, but other risk management tools, services, theories and practices.

What is Teal TV?

Teal College is also the home of Teal TV. Teal TV provides a wide range of education videos on areas such as AML, regulatory compliance, data protection and risk management. These are all contained in one place on Teal TV, so your staff have easy access all year round.

We also have guests on Teal TV, talking about related subjects that we think are going to be interesting for law firms.

Who are the courses in Teal College for?

Teal College has courses available for everyone, so you can feel rest assured that each person in your business is up-to-date on their compliance responsibilities. These include:

1. Courses to update all staff

Teal College is home to a range of courses for all staff, to ensure they’re fully up-to-date with regulations and are fully compliant.

2. Courses for new starters

We’ve made the onboarding process for new starters as easy as possible when it comes to training, and provide essential courses for all of your new starters.

3. Courses for specialist roles

Teal College also keeps your compliance specialists up-to-date, such as compliance officers, MLROs, MLCOs, etc. We even provide training courses for staff who want to become compliance officers.

How can you access Teal College?

Teal College is accessed via the Teal Tracker. However, you don’t have to subscribe to Teal Tracker to benefit from Teal College.

That being said, if you do subscribe to the Teal Tracker, the two work together seamlessly.

The unique courses delivered on Teal College have interactive test functions to ensure the training has hit home. Passing the tests will automatically update the training records of the staff who’ve undertaken them.

You’ll have total control over who takes what course and when, and this all syncs perfectly with the Training Needs Questionnaire, Individual Training Plan and Records on the Teal Tracker.

Are Teal College Courses up-to-date?

There’s no need to worry that Teal College courses are out-of-date. We’re continuing to develop new courses all the time, and refresh existing courses whenever the landscape requires us to. This means your staff will always have the most up-to-date training available.

Get in touch

Teal College is here to revolutionise the way compliance training works in law firms. Keeping everyone up-to-date and compliance safe. For more information or to book a demo, simply get in touch with our experts today.

Launch of our brand new compliance training technology, Teal College Read More »

Compliance Planning: Are you ‘regulator ready’ for 2024?

Blogs, Legal Compliance, Regulatory Compliance / Joanne

In 2023 we saw increased levels of guidance and new directives from our industry regulators along with new legislation and ongoing changes in areas such as sanctions. Therefore, it’s never been more important to be on top of your compliance. Choosing the right partner to assist you is an important part of developing ‘Compliance that Works’ for law firms in 2024. Here, we consider some of the things you might want to contemplate when compliance planning, to ensure you feel confident, safe and ‘Regulator Ready’.

Preparing an annual compliance plan will allow you to breakdown and design an ongoing effort that’s more likely to permeate the whole firm and its behaviours, rather than having the sugar rush and panic of concerted efforts or crisis avoidance.

Where to start compliance planning

Before you prepare your annual plan, you need to ensure you’re up-to-date with the following:

1. Guidance and legislation

Have you got round to reading the LSAG Guidance including the March and November updates and the significant areas covered including the 36 Principles and Proliferation Financing? Much has changed since the last version. There’s also been an update to some Sectoral AML Risk Assessments which you need to take account of, in addition to other guidance, including the results of Thematic Reviews.

Are you up to speed with the requirements of Sanctions legislation? Regulators are beginning to assess firms compliance, visiting them to see how they are coping, what their policies and procedures are.

So, make sure you’re up-to-date with these changes.

2. Policies and procedures

Another great way to start the year is giving your AML policies and procedures a health check.

Don’t forget to provide updated training (another area subject to Regulatory scrutiny at present) and ensure that changes you make are embedded in processes, particularly as we know the SRA, Law Society of Scotland and CLC are committed to carrying out audits and are testing against LSAG Guidance as well as the Regulations.

3. Audits

Carrying out audits is a a good way to start a year. Are people appropriately documenting source of wealth and funds, are matter risk assessments completed appropriately and do they reflect the new guidance and policies, is there documented ongoing monitoring of matters? How about undertaking AML file audits to get the year off to a good start?

4. Risk assessments

You may need to revise your firm wide risk assessment if its more than a year old and record your risk assessment relating to Proliferation Financing. Don’t forget to keep copies of the old one, to evidence it is a living document.

A Sanctions risk assessment would be good idea too!

Compliance planning

It’s now time get the diary out and plan your compliance activity for the year ahead.

January

Now might be a good time to remind everyone of the importance of ensuring that file reviews and supervision are done. Don’t let this drift. Ensure any trends are identified and dealt with. Is training up to date? As well as AML and information security, what about equality and diversity? Have you only undertaken your Bribery Act training just the once, all those years ago?

Regulators are now looking at how firms are dealing with a wide range of Economic Crime, not just AML – there’s Tax Evasion and Fraud too. Don’t forget recent recruits who might not have had all the required training. The Teal Tracker is designed to make this easy for firms to collate and track. Get in touch if you’d like to know more.

February

Are your information security measures adequate? They may well be tested – we know of firms that have been the victims of sophisticated hacking and ransomware, and it has lasting effects, taking many months (and disruption and expense) before things return to normal.

This isn’t simply ensuring homeworkers are updating their anti-virus software. More essentially, are they carefully checking emails and client instructions in order to spot attempts by fraudsters to intercept the movement of completion monies? Is your accounts team in the loop?

March

We know that March is year end for lots of firms, so much of this month could be used up ensuring time is recorded, bills are raised, and general housekeeping dealt with to ensure the figures look as good as possible. However, there are some things to consider if time allows:

If you have the CQS standard, now would be a good time to review your compliance with it. Why not also check your Lexcel compliance if it’s also a standard you have obtained. Remember the requirements for training.
It’s a year since the latest LSAG guidance was published. It might be worth giving it a once over, just to remind yourself what it says.

April

New financial year means a new budget. This is where training should be considered, especially if you haven’t done anything recently.

You may also want to consider that independent AML audit that you’ve been putting off. Regulators are of the opinion that the vast majority of firms need one, no matter how small the firm may be. If you do a reasonable amount of AML regulated work, you need one. If you do conveyancing, you will be caught.

May

May should be a good time to consider your risk management. Do you have a disaster recovery (business continuity) plan? Now would be a good time to test it and learn from the experience. If you can’t test the whole process, you should consider checking one of the greatest risks, such as cybersecurity. Consider:

Is all your IT running the most recent updates?
Have you arranged a Penetration Test with your external IT support?
Have you arranged a mock phishing exercise to see how many colleagues click on dubious links?
Have you considered ‘Friday Afternoon Fraud’?
Have you done any training?
Have you set training reminders?

June

Now’s the time to get to grips with all of that unbilled WIP. Close files, send them to storage, and destroy the really old records that went past their destroy date years ago.

Alongside this, ensure any client monies you have no reason to keep hold of are sent back to clients. You don’t want to get fined for failing to deal with residual client money!

July

Since you did get round to checking CQS issues in March, how about going one step further and organising an independent CQS audit? Contact us to organise one.

Perhaps consider training for your COFA. It’s a good idea to ensure they get specific training. Remember training is a hot topic for Regulators, so make sure the COFA gets some too.

August

Staff will no doubt want a well-earned break which can present additional risks which you should now consider. How will you deal with holiday cover? How will you adapt to people being unavailable?

For those needing to get away from the same four walls, foreign travel might well be on the cards, and they could be venturing to where mobile reception is poor, and Wi-Fi is not secure.

September

If you have spare time, you could look at improving your information security status by checking how you compare against the CyberEssentials standard, or CyberEssentials+.

However, renewal time is likely to keep you busy all month.

October

It’s the anniversary of the SRA Transparency Rules each December and it’s something the Regulator is keeping its eye on. So, now would be a good time to start your review.

Have staff changed? What about fee rates and other costs? Not just changes to your own firm, but think about delayed responses from third parties, busy Courts and other factors. Does your website need a review?

Remember, firms are being fined for lack of compliance.

November

It’s nearly the end of the year, so make sure those file reviews done.

If you have a considerable backlog, your colleagues really aren’t going to be grateful for another round of chasing them to get them done.

Why not get in touch with Teal to undertake some for you? We can help with both AML reviews and Regulatory ones, client care letters, conflict checking, costs updates and the like.

December

Now is as good a time as any to carry out a review of your risk register. If you don’t have one, it’s a good time to create one.

Your risk register should cover things like:

Complaints and claims
Identified trends from file audits and supervision
Business Continuity Plan review outcomes
SARs submitted (or not)
DSARs and information security issues
What went wrong and what went right
The year ahead – what are your audit and training plans for example?

It’s then back to that compliance planning for next year!

Get in touch

At Teal, we’re here to support your journey towards compliance that works by mitigating the risk of legal compliance issues.

Whatever time of year, if you need compliance assistance, our team of experts are on hand. We offer a range of compliance services to ensure you’re on track to achieve compliance success.

Compliance Planning: Are you ‘regulator ready’ for 2024? Read More »

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AML compliance checklist: Strengthening your defence against money laundering

Anti-Money Laundering, Blogs, Legal Compliance / Joanne

It’s important for law firms to embrace due diligence as a key tool in preventing money laundering. In this blog post, we’ll explore the top tips and essential considerations to bolster your AML efforts, ensuring your firm remains vigilant in the fight against money laundering. We’ll highlight the significance of maintaining a robust AML compliance checklist to maximise your defence against the ‘baddies’.

The significance of an AML compliance checklist

As law firms navigate the intricate landscape of anti-money laundering (AML) compliance, having a robust checklist is extremely important. Let’s delve into specific measures that constitute this checklist, and strengthen your defences against money laundering risks.

1. Incorporating your Supervisor’s Risk Assessment

Ensure your AML compliance checklist is crafted to incorporate the critical step of integrating your Supervisor’s Risk Assessment. This step isn’t just a formality, but a strategic move to align with Regulation 18(2), underlining the importance of fostering a comprehensive understanding of potential risks and discrepancies.

By seamlessly integrating your Supervisor’s Risk Assessment into your checklist, you can create a unified approach enabling your firm to proactively identify, assess, and mitigate any potential threats related to money laundering.

2. Client account in Firm Risk Assessment

Within your AML compliance checklist, place significant emphasis on the inclusion of client accounts in your Firm Risk Assessment. Clearly explain how your firm actively identifies and mitigates risks associated with these accounts, providing a granular insight into the specific protocols and monitoring mechanisms employed.

In addition, stress the importance of cross-referencing these account procedures within your overarching AML policy. This dual-focused strategy not only ensures a comprehensive approach to risk mitigation, but also establishes a cohesive framework that aligns your AML efforts with both regulatory standards and internal operational practices.

3. Source of funds and wealth

Within your AML compliance checklist, it’s important to place a robust emphasis on the documentation of the source of funds and wealth. Encourage a meticulous approach towards recording every step taken, conducting thorough reviews of pertinent information, and undertaking comprehensive risk assessments.

Actively promoting a culture of precision in documenting these aspects not only defends your AML efforts, but also ensures a detailed trail for auditing purposes. Also, consider increasing your educational initiatives by hosting informative webinars that delve into the intricacies of source of funds and wealth.

4. Client communication strategies

Within your AML compliance checklist, it’s crucial to equip it with highly effective client communication strategies. Clearly outline to your staff the importance of client due diligence (CDD) checks, particularly those relating to the source of funds and wealth.

Clearly explain the rationale behind these checks, emphasising their critical role in preventing money laundering and fostering a deeper understanding of the legal obligations.

5. Timing of verification

Within your AML compliance checklist, pay attention to timing in your verification processes. Whether opting for the completion of identity and verification (ID&V) before establishing a business relationship, or following the initial interaction, the key lies in the monitoring and comprehensive documentation of the entire process to meet stringent regulatory requirements.

6. CDD on existing clients

Within your AML compliance checklist, it’s essential to discourage over-reliance on existing client due diligence by advocating for the implementation of a proactive ‘shelf life’ approach.

Emphasise the significance of regularly refreshing client due diligence (CDD) to ensure its relevance and effectiveness. Encourage fee earners to take an active role in this process by consistently assessing and reassessing changes in the Matter-Based Risk Assessment.

7. “Purpose of Act” verification

Incorporate ‘purports to act’ verification within your AML compliance checklist. While certain approaches may hinge on Regulation 28(10), it’s wise to go beyond and advocate for ID&V specifically for at least one director. This strategic inclusion ensures a tangible and individual connection to the corporate client, surpassing regulatory compliance.

8. Providing information to clients

Integrate information dissemination into your AML compliance checklist. Ensure your clients receive the required information under The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2023, amended by the Data Protection Act 2018.

9. Understand electronic verification

Enhance your AML compliance checklist by proactively educating your team about electronic verification processes. Clearly outline the steps, checks, and match requirements involved in this technology-driven aspect of anti-money laundering measures.

This educational initiative not only promotes an understanding amongst your team members, but also ensures that electronic verification is seamlessly integrated into your compliance protocols.

Additionally, emphasise the importance of staying well-informed about the details of your chosen service providers, particularly if agreements were made with a previous money laundering reporting officer (MLRO).

10. Certifying copy ID

Exercise thorough caution within your AML compliance checklist when it comes to selecting individuals for certifying copy ID. Prioritise engaging professionals who aren’t only well-versed in AML legislation, but also possess a understanding of the intricacies involved in the certification process.

This strategic selection ensures not only compliance with regulatory requirements, but also contributes to the creation of a reliable and robust paper trail.

Additionally, it highlights the importance of providing clear and comprehensive explanations to both clients and certifiers regarding the specific requirements for accurate and traceable documentation.

Why is an AML compliance checklist important?

An AML compliance checklist is your strategic defence against the damaging effects of money laundering. Through the implementation and continual refinement of these checklist items, your law firm not only enhances its regulatory defence, but also positions itself as a resolute participant in the battle against financial crime.

Get in touch

At Teal, we’re here to support your journey towards compliance that works.

We understand that compliance can be a daunting word, but it’s also the key to unlocking your firm’s full potential.

Get in touch with our experts to find out how we can help.

AML compliance checklist: Strengthening your defence against money laundering Read More »

Office workers sat on chairs in a circle while one person is stood from his chair talking to the group.

Navigating the cultural challenges in law firms

Anti-Money Laundering, Blogs, Legal Compliance / Joanne

With 71% of legal professionals reporting negative impacts on their mental health, law firm culture plays an essential role in fostering a healthier and more sustainable legal profession. Building a culture that supports a diverse workforce, while fostering an environment where individuals feel comfortable speaking up is challenging.

As culture plays an integral part of mitigating compliance risks, we explore the importance of law firm culture and how to navigate cultural challenges in law firms.

The Importance of law firm culture

In the past year, 71% of legal professionals feel that their roles have negatively impacted their mental health. This alarming statistic underscores the need for a significant shift in law firm culture.

Culture plays a crucial role in creating an environment where lawyers can thrive, develop, and provide an exceptional service to their clients.

Elevating well-being and open conversations

The impact of valuing employees’ well-being and the importance of open conversations creates a supportive work culture. At Teal, we employ certain practices to ensure that employees’ mental health and happiness are taken into consideration.

One of these practices is the ‘Happy Bus’ concept, a simple yet effective tool to check in on employees’ well-being. Employees are encouraged to complete their Happy Bus scores at the beginning of the week, and if a score is lower than usual, managers are alerted to check in with the individual. This process provides a consistent avenue for employees to share how they’re feeling and ensures that issues are addressed promptly.

In addition, we introduced a mental health score on the Happy Bus to assess employees’ mental well-being, emphasising the importance of mental health in the workplace.

The challenge of creating a supportive law firm culture

One of the cultural challenges in law firms is nurturing an inclusive and supportive environment from recruitment through to exit.

The 71% of legal professionals recorded may actually be just the tip of the iceberg. It’s possible that many professionals don’t express their concerns due to a lack of a supportive environment to do so. The negative impact on lawyers’ mental health can manifest in various ways, resulting in additional challenges, such as reduced productivity, increased sick days, and, most troubling, lawyers leaving the profession altogether.

Creating a supportive law firm culture is extremely important. Recognising the significance of neurodiversity and the need to prepare organisations to support individuals, without requiring them to explicitly ask for reasonable adjustments, is imperative.

The challenge of attracting and retaining talent

Recruiting top talent is also one of the cultural challenges in law firms. There’s a growing trend of professionals leaving the legal sector for other professions, especially high street law firms, and fewer new lawyers are entering the field.

Over the years, there’s been a transformation in law firm culture. Law firms have transitioned from being solely focused on financial success, to acknowledging the broader spectrum of skills required to create a workplace that values diversity, well-being, and resilience, which is extremely important when it comes to attracting and retaining talent. This is particularly so for high street law firms that provide essential support to individuals facing various life challenges.

In all, a culture that promotes well-being and support is vital to sustain the legal profession.

The challenge of aligning compliance and law firm culture

Compliance should encompass diversity, mental health, and well-being, in addition to traditional regulatory aspects. This alignment requires organisations to be proactive in accommodating employees’ needs, both in terms of working environments and individual conditions.

Addressing these aspects will be pivotal for law firms as they strive to meet the compliance standards of the evolving legal landscape.

Making positive changes in law firm culture

There’s a pressing need for a shift in law firm culture, not only to safeguard the well-being of legal professionals, but also to ensure that clients continue to receive the support they deserve.

Navigating cultural challenges in law firms is an ongoing process, but it’s imperative for firms to proactively align their compliance requirements with the evolving expectations of their workforce.

There’s an urgency to create a culture in law firms that fosters mental health, well-being, and resilience, making the profession a place where lawyers can thrive and provide clients with the support they need.

A culture that values diversity, well-being, and inclusivity not only attracts and retains talent but also safeguards the mental health of legal professionals. Open communication and the ability to speak up about challenges and needs are vital components of this transformative process.

Get in touch

For more information on law firm culture read our blogs on ‘Fostering an inclusive law firm culture’ and ‘The cultural challenges of law firm leadership’.

If you’d like to know how we can help promote a positive law firm culture to help mitigate compliance risks, get in touch today.

Navigating the cultural challenges in law firms Read More »

Multiple hands in a circle on top of each other

Fostering an inclusive law firm culture

Anti-Money Laundering, Blogs, Legal Compliance / Joanne

As culture is so important when it comes to mitigating compliance risks, we can’t express enough the importance of fostering an inclusive law firm culture. It’s critical that law firms create an adaptable work environment and value individuals’ unique preferences, especially in a world where both in-office and remote work are topics of debate.

Having candid conversations, engaging in true collaboration, cultivating a culture of kindness, and maintaining a growth-oriented work environment are essential to sustain a positive law firm culture, and we understand this can be challenging whilst juggling multiple hats of responsibility.

Embracing individuality in work preferences

Creating an attractive environment, where employees genuinely want to be part of the team and buy into the firm’s mission, is a key aspect of building a successful law firm culture. While remuneration is crucial, it’s rarely the sole motivator for professionals.

If you create a culture where people feel valued, seen and heard, staff are more likely to feel committed to the organisation and are more likely to stay, rather than simply comparing and benchmarking pay and package with somewhere else.

Currently, the hybrid work model appears to be the future for most law firms and indeed, post Covid becoming the norm. However, it’s extremely important to strike to maintain balance by conducting meaningful conversations with employees to understand their needs.

Law firms are now recognising that different people have unique preferences and requirements regarding their work environment. While some might thrive in a fully remote setup, others may benefit from the structure of office life. The key is to treat individuals the way they want to be treated, rather than imposing a one-size-fits-all approach.

Elevating well-being and open conversations

In addition, we introduced a mental health score on the Happy Bus to assess employees’ mental well-being, emphasising the importance of mental health in the workplace.

Cultivating a culture of kindness

Kindness might seem like an obvious concept, but it’s easy to lose sight of in the hustle and bustle of professional life. In law firms, where employees wear many hats and are constantly handling complex cases and tasks, practicing kindness can sometimes inadvertently take a back seat. However, it’s crucial to weave kindness into the culture of a law firm. The impact of being kind to one another extends beyond the office walls and contributes to a harmonious working environment.

Cultivating a kind culture in law firms can be challenging. Law firms must consistently and genuinely demonstrate kindness to create a supportive atmosphere. Leaders must lead by example, showing their teams that kindness isn’t only encouraged but expected.

Kindness isn’t a one-time event; it’s a practice and a behaviour that should be ingrained in a firm’s culture from the very beginning. Firms can incorporate kindness as a key performance measure, ensuring that it remains a core element of their workplace ethos. Such an approach will prevent kindness from being overlooked or perceived as an optional add-on.

What should be considered when fostering an inclusive law firm culture?

Acknowledging the need for change and expressing a genuine desire to foster a culture of kindness is the first step in fostering an inclusive law firm culture.

Seek advice, talk to experts in the field, and engage in discussions with team members. Start small and gradually build on these initiatives. It doesn’t have to be an overnight transformation; it’s about taking the first step toward a more caring and empathetic work environment.

Fostering an inclusive law firm culture goes beyond compensation and the office-versus-remote work debate. It involves treating individuals with the consideration and respect they deserve. Leaders must be open and willing to have candid conversations with their team members, create environments where employees can be honest about their feelings, and act on feedback to address their well-being.

Kindness is not merely a buzzword, but an essential element of a thriving work culture. In law firms, where high-pressure scenarios and demanding tasks are part of daily life, practicing kindness is not just beneficial but necessary. Law firms can take the first step by having open conversations, setting a positive example, and making kindness an integral part of their culture from day one.

A supportive, adaptable and kind culture will be the defining factor for law firms that aim to thrive in the changing landscape of the legal profession.

Get in touch

For more information on law firm culture read our blogs on ‘The cultural challenges of law firm leadership’ and ‘Navigating the cultural challenges in law firms’.

If you’d like to know how we can help promote a positive law firm culture to help mitigate compliance risks, get in touch today.

Fostering an inclusive law firm culture Read More »

The cultural challenges of law firm leadership

Anti-Money Laundering, Blogs, Legal Compliance / Joanne

There are many cultural challenges law firms face today, particularly around training, recruitment, succession planning and workplace flexibility. As law firm culture is a huge part of mitigating compliance risks, we delve into the complex cultural challenges of law firm leadership, and highlight the pressing need to adapt to evolving professional expectations.

Education and training challenges in the legal sector

There’s potentially a gap in legal education when it comes to preparing lawyers for the multifaceted roles they may take on in law firms. Education primarily focuses on legal skills, leaving lawyers ill-equipped to handle managerial, people and other operational responsibilities.

Smaller firms could benefit from employing experts in specific functions rather than asking lawyers to fill these roles. By freeing lawyers from non-legal tasks, firms can optimise fee-earning potential while enhancing the quality of support functions. Recognising the value of experts in business operations is a forward-thinking approach that can lead to more efficient and effective law firms.

When it comes to building an effective culture in law firms, leadership roles, such as team leaders, middle managers and business owners are crucial and face their own education and training challenges.

1. Elevating the role of team leaders

Team leaders play a critical role in ensuring that employees feel supported and empowered. However, many law firms overlook the impact of team leaders and miss the opportunity to invest in their development.

2. The challenge of training middle managers

Middle managers, often responsible for managing teams and facilitating communication, are the linchpin of successful law firms. They have a significant influence on the mental health and well-being of their teams. Training for middle managers is essential, as it equips them to have difficult conversations, create safe spaces, and engage in one-on-one interactions effectively.

3. Business owners' multifaceted roles and training needs

Business owners and sole practitioners in smaller law firms often wear many hats. Besides their legal work, they manage personnel, operations, compliance, and business development. This diverse set of responsibilities can be overwhelming, and training is often inadequate for these roles.

Attrition and recruitment challenges in the legal sector

There’s a significant cost of attrition for law firms. When employees decide to leave, they often enter a phase of ‘quiet quitting’, where they reduce their productivity and engagement. The notice period can also be challenging for law firms, as they need to recruit and onboard new talent. Investing in leadership development and training can help mitigate attrition and its associated costs.

The escalating cost associated with recruitment is causing law firms to reconsider their strategies. The 15% to 25% fees charged by recruiters for higher-paid roles can put significant financial pressure on firms. Not to mention the time and productivity lost during the notice period and the onboarding period for new hires. The traditional recruitment approach, fuelled by the urgency to fill vacancies, can be costly in the long run, and cause significant challenges for law firm leadership.

Succession planning challenges for law firms

The legal profession is facing a succession planning crisis. Law firm leaders are struggling to find motivated individuals willing to take on equity partner roles. Various factors, such as the perceived risk and reward of such positions and ongoing global uncertainties, contribute to the reluctance to embrace leadership roles.

This gap in succession planning poses a significant risk to firms, with potential impacts on run-off cover and industry-wide premiums.

Workplace flexibility challenges for law firms

The Covid-19 pandemic has fundamentally altered the work landscape. A debate rages on whether lawyers and staff should return to the office full-time or continue working remotely. While some law firms insist on an office-centric model, others recognise that employee expectations have shifted. The battle over flexibility has divided firms and professionals, with issues of presenteeism and productivity coming to the forefront. This obviously causes a problem for those in leadership roles.

Rather than an adversarial battle between law firm owners and employees, we argue for a more collaborative approach. The key to creating a sustainable and adaptable workplace environment lies in cultivating a culture where employees want to be present. This cultural shift is essential in making the office and workplace attractive and supportive, focusing on quality of life, professional development, and meaningful work.

What cultural changes should law firms consider when it comes to effective leadership?

Effective leadership, supported by proper training, is crucial for a healthy law firm culture. Team leaders, middle managers, and business owners all play pivotal roles in shaping the well-being of employees and the success of the firm.

Recognising the influence of these roles and investing in leadership training is not only a best practice, but also a proactive response to the changing expectations of both employees and regulators.

The transformation of the legal profession is inevitable. To remain competitive and attract top talent, law firms need to reassess their recruitment strategies, adopt proactive succession planning, and recognise the changing priorities of legal professionals.

A culture that combines flexibility and in-person collaboration, supported by effective leadership and training, will be the hallmark of law firms that thrive in this evolving landscape.

Get in touch

For more information on law firm culture read our blogs on ‘Fostering an inclusive law firm culture’ and ‘Navigating the cultural challenges in law firms’.

If you’d like to know how we can help promote a positive law firm culture to help mitigate compliance risks, get in touch today.

The cultural challenges of law firm leadership Read More »

Woman with paperwork on desk using a calculator

SRA’s Sectoral Risk Assessment: Economic Pressures

Anti-Money Laundering, Blogs, Legal Compliance / Joanne

There are four emerging risks that the SRA has identified in the Sectoral Risk Assessment which was published in July 2023. One of these emerging risks is economic pressures. Here, we explain the SRA’s update on economic pressures, the associated risks, and advice on what actions you should take.

What impact do economic pressures have on AML?

We’ve had economic pressures ever since the Covid-19 pandemic. More recently, we’ve seen the cost of living crisis, and increases in pay rises to cope with inflation. It’s been a difficult time for many individuals and businesses and the landscape is still uncertain.

When there are economic pressures, there are two risks to AML, and the SRA in the Sectoral Risk Assessment is calling both of these out.

1. Temptation to reduce costs in AML compliance

The first risk is the temptation to reduce costs in AML compliance. The SRA don’t want to see this occur, and this goes for any changes you make to your policies and procedures. If the SRA believes you’re doing less, and you have made cost cuts in this area, you need to be ready to explain why you think it’s still effective.

If the SRA has records of how many people you’ve got in your AML function, and they carry out an inspection and find you’ve now got a fraction of that number, they’ll be interested to find out why that’s the case.

One question we’ve been asked about saving costs is whether or not firms should introduce a centralised CDD team. It’s important to be aware that introducing a centralised team very rarely saves costs. Although it increases compliance considerably, and you get a better CDD, its unlikely to save you costs.

The SRA, however, is concerned about firms having centralised teams. They think that having a centralised team will take fee-earners away from their compliance responsibilities. This is particularly the case when centralised teams are involved in curating or signing off matter risk assessments, or keeping the matter risk assessments on a system that the rest of the business can’t see. It’s the lawyers’ responsibility to carry out risk assessments, as they have conduct of the matter on a day to day basis, and it’s the lawyers that will need to be able to explain the risks to auditors or regulators.

In a nutshell, the SRA don’t want you to be scrimping on costs. Make sure your staff are resourced properly and that includes your money laundering compliance officer (MLCO), money laundering compliance officer (MLCO).

2. 'Baddies' changing tactics

The second thing that happens when there are economic difficulties is the ‘baddies’ change tactics. When law firms have busy periods, such as a stamp duty holiday, scammers can try to hide in plain sight. This is because, everyone’s far too busy to check properly about source of funds/source of wealth, and the baddies will take advantage of this. This may lead to transactions getting through that wouldn’t in a normal working environment.

When it’s extremely quiet, baddies can start to take advantage of fee-earners’ concerns about billing targets. In some ways they’re very sophisticated, but in other ways their approaches are often quite simple. So, they often come along in quieter times, particular in the area of property, where they’ll approach you with deals that you might otherwise turn down in a normal set of circumstances.

The same applies for corporate deals. Corporate deals can dry up in tough economic times and they’ll target lawyers with deals that would normally be turned away at the matter risk assessment stage.

What action should be taken to mitigate the risks of economic pressures?

Firstly, consider what you’re spending on AML. Is that the right amount? If there are any pressures to reduce what your spend is, especially if you’re bringing in technology and you don’t know how the technology works, take the time to reconsider this. If you’re reducing costs or resources, ensure you document this thoroughly to say why you’re satisfied that it won’t impact on the effectiveness of your AML programme.

Secondly, remind your property and corporate teams that during this time, baddies may be presenting riskier deals in order to take advantage of their need to generate business. It’s important that they understand the risks of money laundering, that they’re able to spot it, that they are honest in their matter risk assessment, and that they turn down things that look too good to be true.

From a compliance point of view, you might want to do some auditing and matter risk assessments to make sure that risks are being properly identified and documented.

Get in touch

At Teal Compliance, we’re here to support your journey towards regulatory and AML compliance.

If you’re looking to ensure that you, your firm and your clients are safe, simply contact our experts today.

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SRA’s Sectoral Risk Assessment: Technology Risks

Anti-Money Laundering, Blogs, Legal Compliance / Joanne

There are four emerging risks that the SRA has identified in the Sectoral Risk Assessment which was published in July 2023. One of these emerging risks is technology risks. Here, we explain the SRA’s update on technology risks, and advice on what actions you should take.

What technology risks are identified in the SRA's Sectoral Risk Assessment?

It’s not the first time that the SRA has mentioned technology risks that are emerging in the legal sector. There are several areas which are in discussion.

1. FinTech - Payment platforms

Recently, there’s been news about one payment platform allegedly allowing transfers from accounts that are identified for money laundering. This raises concerns about what checks are in place for these emerging industries. If they’re not traditional banks, how do we know that they’ve got safeguards in place for AML?

2. FinTech - Crowdfunding platforms

The SRA also talks about crowdfunding platforms, which is also mentioned in the National Risk Assessment. There are instances when people are genuinely crowdfunding in order to pay for their legal fees. However, there’s a risk that people may be using crowdfunding platforms as a way to obscure the source of wealth.

3. Cybercrime

There’s a lot of new legal technology out there, but if law firms don’t know how to use it, they won’t know how to protect it. This could lead to being exploited by the ‘baddies’ and becoming a victim of cybercrime, by them stealing personal information from your clients, infiltrating your bank accounts, etc.

A cyber-attack is an economic crime if the criminals access something that’s valuable, or if they want you to pay them with crypto-currency. So, this is no doubt on your radar already and you’re aware that you’ve got to have procedures in place to prevent cyber-attacks, and that those procedures are tested and working properly.

Over-reliance of technology

The SRA does make the point in their risk assessment about overuse of, and over reliance on, technology to do things like ID&V, with people relying on the big green tick on the report or the pass on the ID&V report as opposed to understanding what CDD has actually been checked and whether you have to do anything else.

With the increase in source of funds/source of wealth technology, understanding how it works and making sure that you’re satisfied with any conclusions that it’s drawing is extremely important.

What actions can be taken to mitigate the technology risks?

Firstly, review the work types that may be exposed to FinTech such as payment platforms and crowdfunding platforms and carry out a risk assessment.

Take a look at recent cyber-attacks of law firms that have resulted in fines from the ICO. You’ll see what investigations have been made and the disciplinary outcomes as a result. The investigations will likely include questions like:

When was last time you trained everybody?
What system do you have in place?
How do you know it works?

Although we’re discussing AML, there’s also an obligation in the Money Laundering Regulations that when you introduce new technology into your law firm, you need to have conducted a risk assessment about it.

When it comes to introducing new technology, you should make it easy for your law firm to comply by communicating exactly what the tech is doing and exactly how it works. If the SRA is doing an inspection, they’ll expect a good level of knowledge from the person responsible for AML on how the tech works.

Consider any tech you’ve introduced and carry out a risk assessment if you’ve not already done so. Also include any tech that you’re considering introducing. We often find that policies don’t include details of the process of any introduction of any new tech. What it should confirm is that a risk assessment will be conducted as to whether it increases or decreases the risk of money laundering or terrorist financing, and it will be recorded in the Practice Wide Risk Assessment.

Whether you’ve got a new case management system; changed your CDD provider; or got a new accounting system, as auditors we’d be asking to see your risk assessment in relation to each piece of new tech.

As with all things compliance, making sure everything is recorded in your assessment is essential!

Get in touch

At Teal Compliance, we’re here to support your journey towards regulatory and AML compliance.

If you’re looking to ensure that you, your firm and your clients are safe, simply contact our experts today.

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SRA’s Sectoral Risk Assessment: Proliferation Financing

Anti-Money Laundering, Blogs, Legal Compliance / Joanne

There are four emerging risks that the SRA has identified in the Sectoral Risk Assessment which was published in July 2023. One of these emerging risks is proliferation financing. Here, we explain the SRA’s update on proliferation financing, the associated risks and advice on what actions you should take.

What is proliferation financing?

Proliferation financing is the act of providing financial support to individuals or entities involved in the development or acquisition of weapons of mass destruction. Essentially, this means nuclear, chemical, biological or radiological weapons.

How does proliferation financing affect law firms?

When considering proliferation financing, you can’t just assume this doesn’t affect you as you don’t do any military work. You have to think about whether the business is actually a sham, which is financing such weapons.

In addition, many of the ingredients of nuclear, chemical, biological and radiological weapons are common, everyday products, such as fertiliser, chemicals and computer chips. Businesses that appear to sell these products for everyday use, may in fact be supplying them for the production of such weapons.

What does the SRA say about proliferation financing?

The SRA does recognise that the risk of proliferation financing in the legal sector is low. However, they make a valid point in that low frequency doesn’t necessarily mean low risk. So, you do have to consider the areas of work that may be exposed to this and, if you have them, you need to identify the risks.

What actions should you take for proliferation financing?

Firstly, you need to consider the work types that might be exposed to proliferation financing. Work types that might be exposed include trade finance, commercial contracts, manufacturing commodities, shipping/maritime and military defence.

Next you should consider jurisdictions. Are any of the countries involved subject to UN sanctions? Additionally, are any of the countries involved suspected of using, or seeking, weapons of mass destruction? Also are any of the countries involved thought to have a weak border? This relates to countries that could involve people sending ingredients of weapons of mass destruction to neighbouring countries, and bringing them back over the border.

Once you’ve carried out your investigation, you need to ensure that you record your assessment.

Just like with sanctions, even if you don’t think there’s a risk of proliferation financing for your practice, you must demonstrate to the SRA that you’ve thought about it. If this is the case, we suggest adding a line in your AML Practice Wide Risk Assessment to say you’ve considered proliferation financing, you don’t work in these areas or jurisdictions, and therefore you consider the risks to be low.

Like with everything, making sure you record everything is essential!

Get in touch

At Teal Compliance, we’re here to support your journey towards regulatory and AML compliance.

If you’re looking to ensure that you, your firm and your clients are safe, simply contact our experts today.

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SRA’s Sectoral Risk Assessment: Sanctions

Anti-Money Laundering, Blogs, Legal Compliance / Joanne

There are four emerging risks that the SRA has identified in the Sectoral Risk Assessment which was published in July 2023. One of these emerging risks is sanctions. Here, we explain the SRA’s update on sanctions, the associated risks and advice on what actions you should take.

What does the SRA say about sanctions?

We know that sanctions is a completely separate regime to anti money laundering (AML), but the SRA has stated: “Firms cannot assume that sanctions are not relevant to them. There are a significant number of British nationals subject to sanctions.”

The problem with sanctions is the strict liability. If you’ve acted in breach of the sanctions, then you’re liable. It’s possible that you might get some relief from sanctions as a result of what you’ve done to try and prevent it, but that would be determined as part of the disciplinary process.

Sanctions doesn’t work like bribery and tax evasion, for example, the failure to prevent bribery or the failure to prevent corporate facilitation of tax evasion. Both of those have a statutory defence regime that says, if you follow the guidance issued by Government to try and prevent sanctions, then you’ll have a defence if it actually happens. There’s no equivalent in sanctions.

So, if you do have a sanctions breach, then you’re at the will of the adjudication process as to how your process will be looked at, and whether or not you’ll be disciplined. Doing sanctions training, having a sanctions policy and doing sanctions screening is not an automatic ‘get out of jail free’ card.

What is the SRA doing regarding sanctions?

The SRA is really ramping up on sanctions. If you’re from a larger firm, this may not be news to you. You’ve probably known about sanctions for a long time, have a sanctions policy in place, may have done sanctions training, and probably always do sanctions screening as part of a wider ID&V process.

However, for the rest of the sector, the SRA is expecting to see sections in your AML PCPs or in a separate policy about sanctions. They’re probably looking for you to have incorporated it into training, or at least communicated the policy in relation to sanctions. This includes how they happen, what to look out for, and what CDD you should be considering.

At the recent Law Society Conference, the SRA confirmed that they’re doing some thematic work on sanctions and inspecting firms. If we look at the potential changes in the forthcoming Economic Crime and Corporate Transparency Bill, the SRA’s remit, as in what they’re responsible to detect and prevent, is potentially going to be extended. We believe it’s highly likely that this will be extended to include economic crime as well as money laundering and terrorist financing.

Economic crime obviously carries sanctions with it. So, whilst at the moment we’re talking about sanctions in the context of your AML risk assessment, if it’s not already on your to-do-list, you should be looking into this. In the meantime, make sure that you’re recording sanctions in your Practice Wide Risk Assessment, demonstrating that you’ve thought about it. If it’s in a separate document, make sure you reference it.

Is there an overlap between sanctions and AML?

As we’ve already said, sanctions is a separate regime to AML. However, there is an overlap. Some of the things you need to consider for AML will also be relevant for sanctions, such as:

1. Jurisdictions

This is where you look at countries where there’s corruption. If you’re using commercially available CDD searching tools, they’re likely to have sanctions checks within them. However, there is a huge list of countries that you should be aware of.

When looking at AML and CDD processes and procedures, think about when are you going to get a sanctions match. Do you do it after you’ve taken instructions, later on, or does it depend on what you find out? Always think about the timing of these things. If there’s some distance in your processes, make sure your lawyers have a good awareness of these high risk jurisdictions. That way, they’ll be able to identify them, not just because a search told them, but because they’ve thought about it.

2. Politically exposed people

Politically exposed people can get vast sums of monies from a country and then disappear with it. They then suddenly become sanctioned.

3. Complex corporate structures

The SRA makes the point that a person who becomes sanctioned may suddenly want to offload all of their assets to other people that they have control over. This is so the assets are being owned by those people, and move through banking systems in the name of these other people rather than themselves. So, your CDD, especially in relation to corporate structures, should involve considering:

Whether it makes sense for that person, or is this an attempt to evade sanctions?
Is it really under the ownership or control of the sanctioned person?

When considering complex corporate structures, don’t scrimp on CDD.

5. Sectors

Of course, there are lots of different sectors which are exposed to sanctions. However, if you have practice areas in the following, these are definitely areas where you should be carrying out a sanctions risk assessment and considering what you think the chances are of being targeted:

International trade
Shipping
Aviation
Immigration

Most high street firms don’t practice in these areas. They’re mainly found in larger law firms, and most larger firms have no doubt already got mature programmes in place for sanctions.

However, with immigration in particular, you need to recognise that it does appear in the SRA Sectoral Risk Assessment and that you should think about whether that’s something you’re likely to encounter.

What actions should you take for sanctions?

If you do get exposed to sanctions, you’ll no doubt have already done this work. However, for everyone who believes it’s unlikely to affect them, you do have to be cognisant of the SRA’s quote that “Firms cannot assume that sanctions are not relevant to them….”

If you don’t think that sanctions are relevant to you, make a risk assessment that states that they’re not and record that you’ve done that risk assessment. When you look at the sanctions guidance, it states you ‘should’ conduct CDD on counterparties. We believe you need to consider whether you should be doing this as part of a risk assessment first, before you implement a process.

Of course, your processes always depend on what your risk appetite is. If you’re a particularly risk averse kind of person, and you definitely want to sleep at night knowing that no sanctions could creep in at all, then you’re going to want to do sanctions screening for everybody.

Consider what action you already take. The SRA suggests that there’s a theme of people doing sanctions screening at the file opening stage, and then looping back around as part of ongoing monitoring. Of course, the issue with sanctions is usually about making economic advantages available to someone. It’s usually much later down the line than file opening. So, think about whether your screening has ongoing monitoring or whether you should rescreen if it’s a one off thing.

Consider if you’ve ever actually encountered sanctions. You may decide that you don’t have sanctions exposure, then you find out you do later on because, for example, there was a problem with processing a payment at your bank, or a problem had flagged up. If so, you might wonder whether your processes are adequate. If not, it might be that you don’t think you need to do much about sanctions. However, don’t say nothing about it! The SRA want you to demonstrate that you have thought about it.

Get in touch

At Teal Compliance, we’re here to support your journey towards regulatory and AML compliance.

If you’re looking to ensure that you, your firm and your clients are safe, simply contact our experts today.

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