What’s on the SRA’s agenda for 2022?
An increase in fines, closure of SIF, and more focus on AML: it’s going to be a busy year for the Solicitors Regulation Authority.
The business plan and budget put forward by the Solicitors Regulation Authority (SRA) for 2022 reveals a number of priorities for the coming year. Top of the agenda is an evaluation of its standards and regulations. Also listed are reviews of quality assurance around enforcement decision making and improving standards of advocacy. And of course, increased monitoring of AML arrangements, support for the adoption of technology and ensuring the information for consumers continues to improve under the Transparency Rules.
Here’s what compliance officers should know about the SRA’s movements this year:
Increase in fines
The SRA is proposing an increase to the level of fines it can impose and recently closed a consultation on its approach to financial penalties for law firms and solicitors. In short, it proposes an increase in the maximum fine from £2,000 to £25,000; moves to take the turnover or income of the fine recipient into account; and an introduction of a schedule of fixed penalties of up to £1,500 to enable lessor penalties to be dealt with more easily.
The SRA has said the changes will enable a broader range of matters to be dealt with more quickly and at a lower cost, leaving the Solicitors Disciplinary Tribunal (SDT) free to handle more serious cases. The regulator has been criticised for its “scandalous” delays in investigating disciplinary cases, with some taking months or even years to resolve. However the Law Society has warned such a steep increase is not appropriate.
The closure of the Solicitors Indemnity Fund
The Solicitors Indemnity Fund (SIF) was established in 1987 to provide compulsory professional indemnity cover to all solicitor practices in England and Wales, but switched to run-off cover in 2000. If a firm ceases without a successor, the last recorded insurer for the firm must provide cover for negligence claims made within six years of the firm closing. SIF covers closed firms once their mandatory six year run-off cover has expired.
SIF will spot accepting new claims after 30 September 2022. That means that solicitors or their estates may be personally liable for losses from any claims that are made, particularly if they worked for firms which closed between 1 September 2000 and 30 September 2016. There has been speculation there will be a replacement to the fund and a consultation on its future has recently closed.
Anti-money laundering (AML) focus
The SRA is in the midst of an AML crackdown, visiting 85 firms in the past year (an average of seven a month), following up concerns about a lack of AML compliance. That’s in addition to a further 168 desk-based reviews. In the most common instances, non compliance was tied to firms not having a proper risk assessment in place, poor client due diligence and insufficient checks on the source of funds. Fines of approximately £160,000 were made in 2020/21, with 39 suspicious activity reports sent to the National Crime Agency.
The regulator is expected to increase its number of visits further this year, carry out more independent AML audits and publish the findings of a review into the role of money laundering officers. “There is still a small but nonetheless significant proportion of firms which are just not doing enough to prevent money laundering,” SRA board chair Anna Bradley has said. “As well as allowing criminals to profit from their actions, they undermine the trust consumers place in the profession, damaging confidence in the rule of law and administration of justice.” Compliant solutions such as Thirdfort take the stress out of digital ID verification, AML and source of funds checks as part of the client onboarding process.
Cyber security concerns
As well as encouraging the digitisation of the sector, the SRA has expressed concerns about the challenges that poses for cyber security. Law firms, particularly those involved with conveyancing and probate, are among some of the most common targets for cyber criminals, because of the value of the financial transactions they handle. The SRA revealed a 300% increase in phishing scams in the first two months of lockdown (March-April 2020) alone, with almost £2.5m stolen by cyber criminals. Remote working, video conferencing and the digitisation of processes have all increased the opportunities for attackers to find vulnerabilities.
The SRA has encouraged firms to sign up for the National Cyber Security Centre’s free early warning scheme, which warns of potential cyber attacks on a network, and plans to introduce a new term into the minimum terms and conditions of firms’ professional indemnity insurance (PII) policies to clarify what cover will be provided for losses as a result of cyber crime.
Forward thinking legal firms are embracing change and their businesses are benefiting greatly.
By bringing in simple, user-friendly solutions like Thirdfort for compliance management, these firms are successfully navigating the evolving regulatory landscape with the tech they now need to stay compliant and speed up client onboarding times.
If you’d like to learn more about how your firm can automate AML and ID verification using Thirdfort, book a demo with one of our team here.
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