COFA for Practice Managers
By Tim Kidd
Tim Kidd reminds practice managers of the key obligations and duties for COFA compliance
The demand for robust compliance programmes for firms is critical. Cybersecurity is more important than ever, and compliance standards can negatively impact law firms. Compliance in any business is about managing and avoiding risks while complying with applicable laws and regulations.
Common compliance problems
Common compliance problems include:
- Failure to meet deadlines
- Attempting to delay deadlines
- Banking client money
- Negative interest rates
The best way to deal with these issues is to do everything you reasonably can to comply with rules and regulations while keeping clients’ money safe and separate from the firm’s accounts.
Communication is key in maintaining client relationships, as long as you are open and honest and do not try to conceal mishaps from your client or company. Equally, it is unnecessary to update clients on all problems if they do not need to know. Often, common issues that can be dealt with quickly, and internally.
The power of practice managers
Covid-19 has had an impact, altering the way legal firms approach compliance. Less than a quarter of firms believe their compliance systems are as effective as they need to be, creating a deficit in financial return. Although covid-19 is slowing certain processes, it is important to remember that most processes have also been hit, and people were often very understanding. However, emerging articles explore the possibility covid-19 can no longer be an excuse for delays. Cracking down on compliance policies can boost your firm's credentials.
Practice managers have responsibility to manage and maintain their solicitors and. Firms, and individuals, failing to comply, can face problems – from being targeted by criminals, fines and even being struck off altogether – not to mention the shame and bad reputation that accompanies these mistakes.
Firms are constantly worried about bad press, so it is vital to protect clients with legal compliance knowledge and training.
The regulatory environment is ever changing. The team or individual leading compliance must keep pace with the regulatory authority.
As with any client relationship, they have a right to complain. Therefore, it is our duty as legal professionals to make sure this doesn’t happen, and, if it does, we must ensure complaints are kept to a minimum, and never bury your head in the sand.
We want clients to have complete trust in the firm, particularly where money is involved. Often, solicitors are handling clients’ money in relation to major life events e.g. buying a house, setting up a business, divorce settlements. The impact, if their money is mishandled because of a compliance issue, will have a significant impact on not only client relationships, but future business.
Over the past year, we’ve seen the number of people working from home increase, proving a further challenge to be more vigilant in compliance policies - online fraud is higher than ever!
This leads us on to Anti-Money Laundering…
In January 2021, the Law Society’s Legal Sector Affinity Group (LSAG) identified the need for in-firm anti-money laundering (AML) training – also reviewing and redrafting the AML guidance for the legal sector following the implementation of the EU’s 5th Money Laundering Directive, to help firms comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
Policy changes such as working from home and GDPR legislation highlight the need for compliance.
At ILFM. we train and support any professional working in legal finance, and the COFA and Practice Manager often requires intense back-up, which we provide.
The role of a COFA is an integral part of the move to outcomes-focused regulations and the key to the SRA’s aim that firms must take responsibility in managing risk to delivery of their legal services.
We offer COFA-specific training is dependent on the size of the legal firm, its individual areas of risk, and the type of work within their client base.
Although as a COFA you are not solely responsible for compliance with the Handbook requirements, you must support and manage your team in finance by ensuring accounts are up to date in regards to SRA rules, whilst avoiding any possible breaches. The COFA detects areas that would be of concern to the SRA.
We, at ILFM, help train and qualify legal finance teams, including the COFA, to ensure that we guide all colleagues with best practice and assured guidelines – which, in turn, benefits compliance.
Tim Kidd is a Partner at The Institute of Legal Finance and Management (ILFM): ilfm.org.uk