What we gained from centralising our law firm's compliance function

If you want to operate in today's legal sector, you have to accept the increasing weight of compliance and regulation. How you face up to it can make the difference between a costly burden and a commercial opportunity. It looks unlikely that we will ever see any relaxation in this area.

Faced with a rising tide of regulation, we strived to create a positive compliance culture within our firm. But, we could see a conflict for fee earners, who were under pressure to balance their compliance burdens with their desire to deliver a stellar client service. We needed to find a way to create cost savings, free up time within fee-earning teams and make improvements in compliance management so that our firm can adapt quickly and efficiently to meet changing client and compliance demands.

We have a concept we call 'intelligent delivery', which has been embedded throughout the business. We decided to apply the thinking behind the concept to our compliance function.

Centralising compliance

We instigated a process mapping exercise which follows client files from the client's first point of contact with the firm through all of the necessary compliance checks to opening the file. We involved fee earners and members of the support team in the work so that they felt able to influence the outcome and to enable us to address any concerns they had about the impact on their relationship with the client and the handling of the work.

The result of that process was the creation of a centralised compliance unit - a five-strong team responsible for opening all new client matters, dealing with day-to-day inceptions and conflict checks. Two compliance assistants focus on workflow development and process mapping.

Before the introduction of the compliance team, files were opened by secretaries who carried out anti-money laundering checks and fee earners took the lead on client verification. We could see through our file review and audit processes that these checks weren't consistently reaching the standards we wanted across the firm, in part because of the split in responsibility. Now, we know that all of the checks are being done properly and that we are minimising risks to the business and the fee earners in this area.

One of the other advantages of the new system is that the compliance team look beyond regulatory checks to consider wider individual and business information, including their financial standing. This objective information has enabled fee earners to discuss payment and cost issues with clients at the outset in a more productive and open manner.

The financial risk to the firm of clients defaulting has been reduced, which has had a positive impact on our lockup. There has also been a real benefit to clients who have been able to make better and more realistic cashflow plans. We're now looking at reviewing reputational issues and considering whether these are clients we want to do business with.

An unforeseen benefit is that, whilst ensuring new data is correct and complete, the team has also cleansed our historic customer data. Like many law firms, we had a huge database of less-than-quality data. The work the team has done should make any future change of practice management software much more manageable, as well as enabling us to use our database to communicate more effectively with clients.

The gains for us have been immeasurable, with the knock-on impact ranging from containing professional indemnity premiums because of our improved risk management, through to much-improved cross-selling achieved through our clean customer database. It's also brought us broader recognition in the sector, with our compliance team winning LawNet's Team of the Year award in 2014 and being used as an exemplar for process management by the Law Society of England & Wales.

Lessons learned

When we first discussed the idea of centralising compliance, it was met with
a great deal of scepticism, both within the firm and externally, as there was a real belief that fee earners would be resistant
to such a change. Having made the change, my only regret is that we did
not do it sooner.

What we have learned is that, whilst change is often difficult within law firms, fee earners are happiest doing the things that interest and excite them. Our lawyers willingly accepted the change when they could see that the changes offered them a chance to focus on what they do best and move away from things that bored or scared them. They also saw that the changes would strengthen their relationships with clients rather than detract from them.

It is essential that the communication around the process is handled well, with openness and a willingness to listen to ideas. And, as ever, when things don't work, be prepared to take a new direction and admit you got it wrong.

Kim Carr is managing partner of FBC Manby Bowdler (www.fbcmb.co.uk) and chair of LawNet (www.lawnet.co.uk)