The ILFM was delighted to run a popular and successful breakfast seminar last month, attended by COFAs from a range of different-sized law firms. The seminar, held in conjunction with Howden, featured guest speakers James Peacham, Sheona Wood and Harriet Quiney from DWF.
DWF’s presentation covered challenges currently facing law firms and upcoming regulatory changes, set against a backdrop of economic uncertainty, cyber security, technological changes (including AI adoption), and increasing regulatory burdens.
A key focus was the SRA's current consultation on how client money is handled (open until 21/02/25), covering three key areas:
The future necessity of firms holding client money in the digital age
Enhanced protection measures for client money
Changes to the Compensation Fund structure
Specific proposals include:
Replacing "promptly" with specific time limits for residual balances
Changes to accountants’ reporting requirements
Separation of authorisation and compliance roles
Stricter monitoring of dormant firms
The presentation emphasised that 75% of firms hold client money, with the SRA issuing a warning notice in June 2024 about the urgent replacement of missing client account funds.
James Peacham went on to discuss two major legislative changes affecting law firms: the new failure to prevent fraud offence and changes to the identification principle.
From September 2025, large organisations (those meeting two of these criteria: 250+ employees, £36m+ turnover, £18m+ assets) will be criminally liable if an associate commits fraud intending to benefit the organisation. The only defence will be having "reasonable prevention procedures" in place.
Key actions firms should take include:
Conducting risk assessments
Reviewing and updating fraud prevention policies
Delivering appropriate training
Ensuring strong leadership commitment against fraud
The seminar also considered changes to the identification principle through Section 196 of the Economic Crime & Transparency Act 2023. Since December 2023, 'senior managers' can now be considered the 'directing mind and will' of a company, expanding corporate liability.
Finally, it highlighted the SRA's increasing enforcement powers, including unlimited fines for economic crimes from March 2024. Recent AML enforcement data shows common breaches include inadequate risk assessments, poor client due diligence, and insufficient staff training.
If you are a COFA in a law firm and would like to register your interest in attending our next COFA event, please get in touch with us here: info@ilfm.org.uk
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