A consultation on how legal regulators, including the Solicitors Regulation Authority (SRA) and Council for Licensed Conveyancers (CLC), can ‘promote the prevention and detection of economic crime’ has been launched by super-regulator, the Legal Services Board (LSB).
Launched on 15th November 2024, the consultation will run until 7th February 2025 with the objective to ‘underline the important role of legal services regulators in tackling economic crime.’ The LSB say that although regulators already have a part to play in upholding the UK’s economic crime regime, this was not previously set out as an explicit duty in legislation. A new legal duty, set out in The Economic Crime and Corporate Transparency Act 2023, introduces this as a new regulatory objective under the Legal Services Act 2007.
In the consultations’s executive summary, the LSB clarifies the point this latest initiative places the onus on regulators to ‘comply with the new regulatory objective…making clear that preventing and detecting economic crime is a responsibility that the Act places on the LSB and the approved regulators, rather than regulated persons directly.’ Before adding ‘regulated persons are required to comply with the regulatory framework implemented by regulators to meet the regulatory objective.’
Economic crime includes money laundering, sanctions evasion and fraud. When lawyers are implicated in such activities, it undermines the integrity of the legal profession say the LSB, denting public confidence and trust.
The message echoes comments made at the recent SRA COLP & COFA conference where close monitoring of firms’ attitude to anti-money laundering, source of funds, source of wealth and know your client will remain a key feature of regulation. In a slide presented to the attendees the SRA made clear they are going to expect firms to have done “targeted” training rather than generic courses with examples including the incorporation of real life case studies, regular refreshers (not just annual training), adapting training to different learning styles, and clarifying the link between good compliance and firm success.
LSB Chief Executive, Craig Westwood, said:
“Our goal is to bring about a step change in efforts from legal services regulators to tackle economic crime. This is essential to securing a legal sector that benefits the public and is built on strong foundations that uphold the rule of law.”
“Legal services regulators can play a crucial role in preventing economic crime, and the public harm it causes, by ensuring the profession adheres to high ethical standards and knows how to identify and prevent unlawful activities. By providing clear and practical guidance, we aim to help regulators develop effective processes and resources. This consultation is a critical step in ensuring that the legal sector remains vigilant and proactive in the fight against economic crime.”
The consultation is asking for feedback on draft guidance for regulators to help them understand how to meet this new duty. In line with outcomes Focused Regulation, the guidance sets out the following outcomes that regulators should meet to demonstrate that they comply with the new regulatory objective
- (a) Understand the risks and issues that may lead to the regulated sector facilitating economic crime and take appropriate actions to prevent and detect their occurrence.
- (b) Ensure that authorised persons understand their duties and the risks related to economic crime in the provision of legal services and are supported to act in a manner that upholds the rule of law and adheres to the professional principles and other regulatory obligations.
- (c) Monitor authorised persons’ compliance with any standards developed by regulators to support the prevention and detection of economic crime and address instances where authorised persons fail to comply.
- (d) Regularly evaluate any implemented standards and procedures to ensure they continue to be fit for purpose in addressing economic crime risks over the long term.
The consultation can be reviewed on the LSB website and will close on 7th February 2025.
