The COVID-19 pandemic has created unprecedented pressures across all industries. The legal profession is no exception.
The Solicitors Regulation Authority (SRA) have identified the following risk areas with regard to compliance with Solicitors Accounts Rules in the current climate.
A delay in the filing/signing of an accountant’s report will be treated with a pragmatic and proportionate approach by the SRA. If there are good reasons why the reporting accountant requires an extension to the time needed to prepare a report at this time, it is considered unlikely that the SRA would take any subsequent disciplinary action.
It is important to document reasons for the delay and to record the actions taken by your firm and your reporting accountant. One common reason for a delay at this time will be the physical access to client files to be tested.
Delay in banking client cheques into a client account – Efforts should be taken to contact the client as soon as possible and see if funds can be transferred electronically. If they cannot, then the reasons why the cheque has not been banked promptly should be documented and the cheque paid in as soon as possible.
Payment slips where signed by fee earner to authorise withdrawal of client funds – Although good practice, the rules do not specify that the request needs to be signed and therefore at this time an email authorisation should suffice. This must be in-line with a firm’s recorded policies. It may be appropriate to attach a copy of the ledger with the request to show that sufficient funds are held for that particular client.
Bank payments – many firms have a process whereby payments are processed by the accounts team but authorised by a partner/director. If this system cannot operate at the current time, thought should be given to designating authority to another appropriate individual/another appropriate system devised.
Delay in preparation of bank reconciliations – if reconciliations cannot be performed as usual due to consequences of the pandemic, then a firm should have contingency plans in place. If these plans cannot be performed, then alternative arrangements should be arranged. All actions should be clearly documented.
Many firms have continued working, although often at a reduced capacity and from home. Reasons for any delays should be documented.
Systems and segregation of duties should be maintained as close to the ‘norm’ as possible. If there are significant issues with this consideration should be given to generating compliant processes for this new-style of operation.
It is vital that anti-virus software is updated and that processes are put in place to reduce the risk of fraud. Appropriate back up processes should also be in place to ensure that information isn’t lost, and mobile phones should be encrypted.
Finance teams should be reminded of the increased risk of cyber crime in the current climate, particularly if different personnel or processes are being used. Individuals should be made aware of signs of fraudulent emails and scams and firms should have procedures in place to respond to an attack. Good communication between individuals in the firm is important.
It is vital these controls are robust. Losses of client data and money may be classified as serious breaches.
The SRA have set the expectation for solicitor firms to do everything they reasonably can do in order to comply with the rules during the period of the pandemic. The protection of client money remains paramount, but the SRA have stated that they will take a proportionate approach to enforcement.
Therefore, the SRA will be focussing on serious misconduct at this time.
High-quality documentation is vital. If there is a subsequent investigation by the SRA it is key that processes and actions are recorded, along with the rationale supporting the actions taken. If solicitors are unsure about an ethical issue, they should contact the Professional Ethics help line for advice. You should record as many details of the conversation as possible.
To reiterate, documentation, robust processes and controls and communication are the vital ingredients of compliance at this time.
Please note, the information above is correct as of Monday 08 June 2020 but may be subject to change and some elements of business support are devolved and therefore support may differ in Scotland, Northern Ireland and Wales.
For the latest guidance and professional advice, please contact us or speak to your dedicated Duncan & Toplis adviser.