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The Strategic Scoop #2
May 17, 2024

Welcome to issue No.2 of the Strategic Scoop, where we bring you the most vital stories currently impacting your industry. Apart from keeping you informed, we offer advice where we can and have even added an additional Scam Alert section. This way, we can keep you in the loop on the latest threats targeting law firms and how best to deal with them. Your fortnightly comprehensive roundup is just one of the means we at TSP have of giving your business the foundation of industry knowledge needed to keep your firm where it deserves to be – ahead of your competitors.

‘Precedent for Introducing Higher Fining Powers is Clear,’ says Baroness Stowell

The SRA has supposedly secured support in the House of Lords to increase its fining powers.

Baroness Stowell of Beeston, who chairs the Communications and Digital Select Committee, has stated in a letter addressed to lord chancellor Alex Chalk that there is scope for legislating to widen the areas where the Solicitors Regulation Authority could have unlimited powers. Following the evidence from the SRA on strategic litigation against public participation, Baroness Stowell of Beeston highlighted the inconsistency in punishing breaches relating to economic crime and for firms engaging in abusive and problematic litigation. Unlimited fining powers were given to the SRA not long ago by the Economic Crime and Corporate Transparency Act for misconduct relating to financial crime. Stowell wrote that ongoing legislation concerning the restriction of SLAPPs should also have the same ability to issue unlimited fines.

“At present, the regulator can fine traditional law firms up to £25,000 for wrongdoing related to SLAPPs,” stated Baroness Stowell. “This sum is very small given the overall turnover of these firms. During the course of our work, we have been told that this does not provide an effective deterrent. The precedent for introducing higher fining powers is clear. The SRA already has powers to fine alternative business structures (other types of firms carrying out legal work) and those working in them £250m and £50m respectively. The logic of having a fining limit 10,000 times lower for traditional law firms eludes us.”

The Strategic Litigation Against Public Participation Bill will soon move to the report stage in the House of Commons due to passing both the committee stage and second reading. To read the full article, click the link below:

The SRA has supposedly secured support in the House of Lords to increase its fining powers.

SRA Highlights Concerns Over Interest Rates and The Client Account

In the April Solicitors Regulation Authority (SRA) update, the regulator shed light on a concerning trend, which was identified in The Law Society’s Financial Benchmarking Survey. According to the figures revealed in the survey, there has been a significant surge in interest earned on money held in client accounts, with the total net interest income skyrocketing by over 1,000% to £27.5 million compared to £2.6 million in 2022.

This notable increase has sparked continued scrutiny and questions from within the legal community, particularly during the SRA’s recent Virtual Compliance Conference during their Accounts Rules session. The panel addressed queries about the substantial interest gains from client accounts and the agreements firms have in place with clients.

In response, the SRA reiterates the importance of clarity when talking to clients or other connected parties about interest rates and the requirement to ‘properly account to clients for any financial benefit you receive as a result of their instructions, except where they have agreed otherwise’ (Rule 4.1). Rule 7 of the Accounts Rules emphasises the obligation to fairly compensate clients for interest earned on their funds and says:

  • You account to clients or third parties for a fair sum of interest on any client money held by you on their behalf.
  • You may by a written agreement come to a different arrangement with the client or the third party for whom the money is held as to the payment of interest, but you must provide sufficient information to enable them to give informed consent.

Although most firms may not be affected by interest concerns due to banking account charges cancelling out any ‘financial benefit’ or the temporary nature of funds held in client accounts, there are reports of instances where some firms have profited from holding large sums for extended periods. There are also concerns about some firms failing to account adequately to their clients regarding the accrued interest.

The SRA emphasises the need for law firms to engage in open dialogue with clients regarding interest rates and payments, especially in the absence of predetermined agreements. Any evidence of unfair practices will prompt swift action from the SRA to ensure compliance with regulatory standards.

Read our full article below:

SRA Highlights Concerns Over Interest Rates and The Client Account

A Warning on the Importance of Cooperating with the SRA

A £1000 fine has been issued to a solicitor after he failed to pay an invoice for legal fees within an acceptable amount of time. The solicitor in question also failed to cooperate with the Solicitors Regulation Authority and their investigation into their misconduct.

The SRA stated: “[the solicitor] failed to perform the undertaking by not paying the seller’s legal fees within a reasonable time frame.” Multiple failed attempts to chase for payment were made after an invoice was sent to the solicitor, yet the invoice was only paid over 11 months later.

The regulator explained how the solicitor failed to work with and cooperate with the SRA investigation and remarked that his failure was “serious and diminishes trust in the legal profession.” They went so far as to comment on his conduct as “reckless” and that he had “shown little/no insight into his conduct”.

“[The solicitor] is an experienced solicitor, a partner at the firm. He had direct responsibility and control of his own conduct. His failure to respond and cooperate with the SRA damages the SRA’s ability to effectively regulate the profession. His failure to cooperate with the SRA persisted for five months. The public must have confidence in the regulatory process. By failing to cooperate with the investigation officer in an open, timely and co-operative manner, [the solicitor] has damaged that confidence.”

The SRA acknowledged that the solicitor “did not receive any financial benefits from the conduct,” and the invoice has now been paid. Altogether, they was fined £1,183 and ordered to pay an additional £60.

To read the full Law Society Gazette article, follow the link below:

Solicitor Fined Over Late Payment of Invoice

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If you are not currently a TSP member and would like to learn more about our Emergency SRA Response Line or the other benefits of the membership, follow the link below:

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Firm Fined nearly £9,000 for AML Failures

A Southampton-based firm was subject to an inspection by the SRA’s anti-money laundering team, which carried out an inspection of its AML compliance back in December 2021. The investigation identified numerous areas of concern surrounding the firm’s compliance with requirements for a documented firm wide risk assessment and AML training. In April 2022, the firm was subsequently supplied with sufficient guidance to remedy the potential breaches. The firm then implemented a documented Firm Wide Risk Assessment and a training policy within the same month. It also took steps to update its PCPs, though they were still found to require further improvement.

It is estimated that between the period of 26 June and 22 April 2022, the firm failed to have in place a documented assessment of the risks of money laundering and terrorist financing to which its business was subject. The second allegation resulted from activity that occurred from 26 June 2017 onwards, when the firm failed to maintain sufficient PCPs. They also failed to mitigate and effectively manage the risks of money laundering and terrorist financing pursuant to Regulation 19(1)(a) of the MLRs 2017 and to regularly review and update them. The third allegation concerned the firm’s failure to conduct client and matter risk assessments on eight different client files. Lastly, the firm failed to take appropriate measures to ensure that all necessary employees received sufficient AML training.

As a result, the firm was instructed to pay a penalty of £8,964 and ordered to pay costs of £1,350. Fines of this stature are to be expected for conduct that breaches regulatory obligations for longer than is acceptable. Fundamentally, the decision to fine was based on the firm’s conduct, which held the potential to cause harm to the public interest and to public confidence in the legal profession. In making their decision, the SRA considered the facts that the firm had, firstly, made admissions to said conduct and, secondly, took some remedial action to improve on their compliance.

To read the full SRA report, follow the link below:

Solicitors Regulation Authority: Recent Decisions

Reach Out to The Strategic Partner

If you at any point believe your firm may be at risk of non-compliance, reach out to us immediately. There appears to be no sign of the regulator’s current intensified interest in AML waning, making it crucial for your firm to ensure you are doing everything to fend off the risk of falling short of the expected standards. The fine issued to the firm mentioned above was primarily down to three factors:

  • Insufficient Firm Wide Risk Assessment Documentation
  • Insufficient Anti-money Laundering Training
  • Insufficient Policies, Controls and Procedures (PCPs)

TSP offer a range of solutions that specialise in helping firms of all sizes improve on their compliance, so you can rest easy in the knowledge that oversights and ignorance of regulatory obligations aren’t something that will negatively impact your business. If any of the above factors are something you believe your business may need assistance with, see below to review our packages and what they can do to enhance your business’s performance and overall efficiency.

Follow the links below to review our two main packaged solutions:

SCAM ALERTS

Website claiming to be a law firm under the name ‘Alexander Harvey & Co Solicitors’

A website at the web address ‘www.alexandernharvey.co.uk’ is operating under the guise of a supposed law firm called ‘Alexander Harvey & Co Solicitors’ based in London. The website provides a telephone number ‘+44 800 861 1624’, an email address of ‘office@alexandernharveys.co.uk’ and a postal address of ’95 Chancery Lane London WC2A 1DT. An individual named ‘Andrew Drayton’ claiming to be from ‘Alexander Harvey & Co Solicitors’ contacted a member of the public in relation to a supposed performance bond and requested the transfer of 10,000 CHF (Swiss Francs) to a bank account in the USA. 

A further email address of ‘andrew@alexandersharvery.co.uk’ and telephone number of ’44 208 040 4557‘ was provided in correspondence to the recipient together with a photocopy of a passport supposedly confirming Andrew Drayton’s identity.

The SRA does not authorise and regulate a firm of solicitors called ‘Alexander Harvey & Co Solicitors’ or a solicitor called ‘Andrew Drayton’. Any business or transaction through ‘Alexander Harvey & Co Solicitors’, ‘Andrew Drayton’ and the above emails and telephone numbers are not undertaken by a firm or individual authorised and regulated by the SRA.

Emails and telephone calls misusing the name GG Criminal Solicitors

The SRA has reported that emails and telephone calls have been made misusing the name of GG Criminal Solicitors. The emails were sent from ‘advice@ggcriminalsolicitors.co.uk’. Telephone calls were also made from the number ‘020 3376 8293’. Some emails purported an offer to recover money invested in the failed company ‘The High Street Group’. Other emails sent were in relation to cryptocurrency. Any business or transaction through the email address ‘advice@ggcriminalsolicitors.co.uk’ or telephone number ‘020 3376 8293’ is not undertaken by a firm or individual authorised and regulated by the SRA.

The SRA authorises and regulates a firm of solicitors called GG Criminal Solicitors Ltd. Its head office address is 5H Townend House, Wisemore, Walsall, WS1 1NS. Its email address is ‘crime@ggcriminal.com’ and its telephone number is 07786838832.

Emails misusing the Hogan Lovells International LLP name

Emails have been sent falsely claiming to be from ‘Laurence Crowley’ of Hogan Lovells International LLP. The emails contained a false invoice and asked the recipient to make a payment. The SRA has been notified that the emails were sent using the email domain of ‘laurence.crowley@hogansllovel.com’. Any business or transactions through the domain ‘laurence.crowley@hogansllovel.com’ is not undertaken by an individual or firm of solicitors authorised and regulated by the SRA. The SRA authorises and regulates a genuine firm of solicitors called Hogan Lovells International LLP. The firm uses the domain ‘hoganlovells.com’. The SRA also authorises and regulates a genuine individual called Laurence Crowley, who is employed by the same firm.

Misuse of the name of ‘Gregory Smith’

Correspondence has been sent that falsely claims to have been sent by ‘Gregory Smith’, an employee of Blockchain Legal Firm, which advises the recipient to complete a transfer on Kraken in order to release funds following the successful outcome of litigation. The correspondence provides the email addresses ‘customer_support@recovery-blockchain.com’ and ‘customer_support@message-kraken.com’. Please note, the correspondence misuses the name and SRA ID of a genuine solicitor, though the SRA does not authorise or regulate a firm called Blockchain Legal Firm. Any business or transactions through ‘Blockchain Legal Firm’ or the email addresses ‘customer_support@recovery-blockchain.com’ and ‘customer_support@message-kraken.com’ are not undertaken by a firm or individual authorised and regulated by the SRA. The SRA authorises and regulates a genuine solicitor called Gregory Smith, whose SRA ID is 280797.

Misuse of the name of Carmen Mirela Filimon and Solicitors Regulation Authority

Emails have been sent out falsely claiming to be from ‘Carmen Mirela Filimon’. The emails allege that the SRA is investigating and recovering funds relating to a company based in Cyprus which had been engaged in fraudulent activities. The emails also make reference to investment fraud and allege that the recipient of the correspondence has been identified as a client who has incurred losses as a result of the supposed fraud. The email expresses an interest in investigating the case and invites the recipient to provide a telephone number in order to arrange an appointment.  

The email was sent using an email address of ‘carmen.filimon@solicitor.ac’. The email provides a postal address of ’30 Fenchurch Street EC3M 3AD’. Please note, the email misuses the name and SRA ID of a genuine solicitor. Any business or transactions through the email address ‘carmen.filimon@solicitor.ac’ is not undertaken by any individual or firm authorised and regulated by the SRA. The SRA authorises and regulates a genuine solicitor by the name of Carmen Mirela Filimon and her SRA ID is 522515. The SRA does not have within their employ, however, an individual by the name of Carmen Mirela Filimon and has no connection to the email domain @solicitor.ac

I’ve Been Contacted
What are the next steps?

When a firm’s or individual’s identity has been copied (or cloned), due diligence is necessary. If you receive correspondence claiming to be from the above firm(s) or individual(s), or have received similar information from sources you believe might be suspicious, you should conduct your own due diligence by checking the authenticity of the correspondence by contacting the law firm directly by reliable and established means.

You can also contact the SRA directly to find out if individuals or firms are regulated and authorised by the SRA and verify an individual’s or firm’s practising details. Other verification methods, such as checking public records (e.g. telephone directories and company records) may be required in other circumstances.

Get in Touch with
The Strategic Partner

TSP are always at hand to provide tailored guidance to help you make the most informed and beneficial decisions. Helping you understand the recurrent regulatory shifts and working with you to provide solutions to any problems that may occur as a result is something we are both equipped and prepared to assist you with. With our team of professional specialists and our renowned legal expertise, we can work with your firm to always ensure you are never left unprepared in the wake of legal changes.

Contact Us

If you require any further information or support, please don’t hesitate to contact us via the information below. We will always be happy to hear from you.

For more information on how we can help, call our consultants on 0203 911 9710 or email us at info@thestrategicpartner.co.uk

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