On January 6, the findings of the Solicitors Regulation Authority (SRA) in relation to the agreement reached with leading law firm Mishcon de Reya on December 20, 2021 were widely publicized.
Law firms are still grappling with bridging the gap between commerciality (providing services that their clients demand) and compliance standards. These standards are not only becoming more stringent, but they are also becoming more widely enforced.
What went wrong?
Mishcon de Reya admitted to a number of failings in the regulatory settlement agreement, all of which are related in some way to the EU's anti-money laundering regulations (AML).
Some of the violations, such as holding client funds without performing related legal work, are SRA rules that apply only in the United Kingdom.
But, at their core, they're all about having adequate systems and controls in place to detect potential criminals and knowing what to do if suspicions are justified.
What should lawyers learn?
These are multi-leveled lessons. First and foremost, management must train employees to recognize red flags and have the tools to do so. A strong line of defense - a compliance team - and a zero-tolerance culture for illegal activities are required.
Lawyers and non-managerial staff, need to take the role of being a professional so seriously that the questions of "what am I really doing, for whom, and why" cut through each and every engagement.
Lawyers are often too focused on their clients to ask these basic questions, and they fail to engage with the systems and controls that are already in place.
Lawyers must understand what they are being asked to do, who is asking them to do it, and why. If that doesn't add up, raise the alarm by speaking with a colleague, the Money Laundering Reporting Officer (MLRO), and/or outside advisors. The consequences of making mistakes are becoming increasingly dire.
By fLEXI tEAM