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Frequently Asked Questions (FAQ'S)

Introduction

In response to queries that the Society is receiving about its Regulations and the potential impact of COVID-19, the Society has prepared the following Frequently Asked Questions (FAQs). These FAQs are located in the COVID-19 section on the Society’s website. The Society will update these FAQs as appropriate and members should continue to check this section on a regular basis.

General

1.       What if my question is not covered by the FAQs?

If you have a specific query that is not covered by the FAQs, please get in touch by email with the Society’s Regulation (Professional Conduct) Department at either regulation@lawsoc-ni.org or enquiry@lawsoc-ni.org. Please address your query for the attention of the Regulation (Professional Conduct) Department.

2.       What should I be documenting and recording? 

Members should fully document and record their approach, reasons and all decisions or actions taken in the event that they are asked to explain same at a later date from a regulatory perspective.

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 Accounts compliance

1.       Do I need to still keep my books of account up to date?

Regulation 26 of the Solicitors’ Accounts Regulations 2014 requires every principal to keep properly written up accounting records at all times.

This means that transactions should be recorded as soon as possible after their completion.  The books of account should not be written up weeks in arrears or when the quarterly reconciliations force it to be done.  When in arrears this frequently leads to the creation of adverse client ledger debit balances or office ledger credit balances.

2.       What will happen if I miss the accountant’s reports deadline, and risk any qualified reports being submitted to the Law Society late?

During the current Coronavirus (Covid-19) pandemic, the annual independent statutory Reporting Accountant’s Report may be delivered electronically to the Law Society via secure email to Regulation@Lawsoc-ni.org . The original hard copy report should be provided to the Society by no later than 31 August 2020. This time limit will be kept under review given the present circumstances.

If the statutory Reporting Accountant delivers a Report without having attended the firm, their Report will be qualified. A Report delivered in such circumstances will be regarded as interim only, until such time as the statutory Reporting Accountant has been able to conduct an inspection fully in accordance with the Solicitors Accounts Regulations 2014. 

Reports due to be delivered to the Law Society;

1. On or before 30 April 2020

As previously advised, the timeframe in which annual independent statutory Reporting Accountants’ Reports must be delivered to the Society was automatically extended by three (3) months solely for those Reports which were due to be delivered in either March and April 2020 and suspended the requirement for statutory Reporting Accountants to attend firms during the relevant period.  This remains the case.

2. After 30 April 2020

Should it become necessary to do so, firms are able to apply to the Law Society to consider an extension of time in order to deliver their annual independent statutory Reporting Accountants’ Reports. 

In such a case, the principal should write in to the Law Society via secure email to Regulation@Lawsoc-ni.org with reasons for the extension.  Applications should be made at an early stage and will be considered on an individual case by case basis.

3.       Can I delay the quarterly deadline for reconciliation statements?

Regulation 26.4 of the Solicitors’ Accounts Regulations 2014 requires that client and office bank reconciliations be prepared on at least a quarterly basis.

This is a key part of making sure you are protecting clients’ money.  If there are any differences shown by the reconciliation, firm principals are under an obligation to promptly investigate and resolve any issues. Firms should therefore have contingency plans in place to make sure reconciliations are completed and meet their statutory and regulatory obligations. 

If your contingency plans fail because of the impact of COVID-19, then we recommend that you take what other steps you can to assure yourself that client money is being dealt with properly. You should document your approach and all your decisions.

4.       I am unable to bank a client’s cheque at the moment, what should I do?

Regulation 13.1 of the Solicitors’ Accounts Regulations 2014 provides that monies will be paid without delay into the relevant client or trust accounts.  "Without delay" means, in normal circumstances, either on the day of receipt or on the next working day.

If you are delayed in paying in any cheques because of the impact of the COVID-19 on your firm or your bank, we would expect you to keep your client updated as to the position.  You should document your approach any decisions you make and the Society may take these mitigating factors into consideration of any breach.

You may also want to look at other banking options so you can continue to effectively deal with your client’s money, such as requesting electronic payments where these are possible.

5.       How do I ensure compliance regarding the transfer of costs to office account from client account?

Regulation 17 of the Solicitors Accounts Regulations 2014 requires that;

·         Money must not be drawn from the clients’ account towards payment of costs unless a bill of cost has been raised and delivered to the client.

·         Monies on account of costs may be transferred from the clients to the office account providing interim bills of costs have been properly prepared and delivered to the client with a clear indication that the money is being so drawn.

·         Monies retained on the client account earmarked for costs must be transferred out of the client account within 10 working days of receipt and any outstanding disbursement must be accounted for promptly.

If you are delayed in transferring costs out of the clients’ account because of the impact of the COVID-19 on your firm or your bank, you should document any decisions you make and the Society may take these mitigating factors into consideration if there is a breach.

You may also want to look at other banking options so you can continue to effectively deal with your client’s money, such as requesting electronic payments where these are possible and it is secure to do so.

6.       What is happening with the Society’s inspection activity?

Until further notice, the Department’s inspection activity will be conducted by way of off-site Desk Top Reviews.  This will not be as in-depth as actual inspections and is likely to include some follow-up correspondence with firms.  Where an issue comes to light requiring urgent attention, the Desk Top Review may lead to a subsequent full inspection of the firm.  The Society’s Compliance Officers will contact principals directly should this be necessary.

 Key resources

Solicitors' Accounts Regulations 2014 

Solicitors' Accounts Regulations 2014 - Guidance Note 

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Anti-Money Laundering/Counter Terrorist Financing (AML/CTF) Compliance

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (Amended) (the Money Laundering Regulations 2017 (Amended)).

The Money Laundering Regulations 2017 (Amended) are statutory obligations and notwithstanding the current circumstances, members must continue to comply with their obligations under these Regulations.  The Society is not able to waive or otherwise relax any of these requirements, though members may avail of any flexibility in the Regulations and guidance in application of the Regulations.

The Society has been collaborating with members of the Legal Sector Affinity Group (LSAG) (which comprises UK legal sector supervisory authorities and professional bodies including the Society) to prepare further information and assistance for practitioners in relation to preventing Money Laundering/Terrorist Financing.

The LSAG has jointly published an Advisory Note, highlighting key AML/CTF risk and challenges for the legal sector associated with COVID-19 crisis. It also includes information to assist practitioners with their ongoing obligations under the Money Laundering Regulations 2017 (Amended).

The LSAG Advisory Note - COVID-19 is available here

1.       How should firms operate if the Nominated Officer/Money Laundering Reporting Officer (MLRO) and/or Money Laundering Compliance Officer (MLCO) is absent?

MLROs and MLCOs are required under Regulations 21(1) and (3) of the Money Laundering Regulations 2017 (Amended).

Firms should have in place plans for the illness of their MLRO and/or MLCO. Some firms will have deputies in place that may support the practice.  You should consider absence planning measures and nominate someone to fill in, maintain records and update the MLRO or MLCO on their return.

If the MLRO or MLCO leaves or can no longer carry out that role because of long term sickness, then the firm needs to notify the Society of the new role holders within 14 days of them changing. An AccessNI Basic Disclosure Certificate may be required.

Members should note that the National Crime Agency/UK Financial Investigation Unit (UKFIU) has been clear that it remains ‘open for business as normal’. Members must continue to comply with their reporting obligations under the suspicious activity reporting regime.

2.       How do I carry out Client Due Diligence (CDD) if I am working remotely?

Members are referred to the LSAG Advisory Note - COVID-19 which includes information on undertaking client due diligence, where meeting in person may not be possible.

The Society also reminds members of the following:

·         Firms should adopt a risk-based approach, taking into account the contents of their firm Risk Assessment, their Policies, Controls and Procedures and individual matter Risk Assessment as required by the Money Laundering Regulations 2017 (Amended).

·         Firms are reminded to update their Risk Assessments, Policies Controls and Procedures to ensure they take into account the current circumstances in which firms are operating.

·         Identifying your client and verifying their identity is a key part of the CDD process. The exact measures you take will vary from case to case and will depend on your assessment of the risk arising in the circumstances.

·         Non face-to-face business relationships or transactions, without certain safeguards is identified in the Money Laundering Regulations 2017 (Amended) as a risk factor which would normally warrant more checking than usual, i.e. enhanced due diligence.

·         CDD is also about assessing the purpose and intended nature of the business relationship. If anything strikes you as unusual or high risk then, again, you should consider conducting further EDD.

3.       Can I use electronic verification?

·         Members are referred to the LSAG Advisory Note - COVID-19 which includes information on digital identification and verification services.

·         Members are referred to Regulation 28 (19) of the Money Laundering Regulations 2017 (Amended) specifies that information obtained through some electronic identification processes as set out therein may be regarded as obtained from a reliable source independent of the person whose identity is verified.

·         Where clients cannot produce a document required for CDD purposes due to the pandemic, firms should consider whether there are any other ways of being reasonably satisfied as to the client’s identity.

·         Members should document and record in writing their approach and all their decisions.

·         For further guidance on CDD and EDD measures, including electronic verification, members should refer to the HM Treasury approved LSAG Anti-Money Laundering Guidance for the Legal Sector. The LSAG Key Changes document and the LSAG Advisory Note – COVID-19 will also assist.

·         Members may also want to look at the helpful guidance the Financial Action Task Force (FATF) have put out on Digital Identity.

4.       What is happening with the Society’s inspection activity?

Until further notice, the Society’s inspection activity will be conducted by way of off-site Desk Top Reviews.  This will not be as in-depth as actual inspections and is likely to include some follow-up correspondence with firms.  Where an issue comes to light requiring urgent attention, the Desk Top Review may lead to a subsequent full inspection of the firm.  The Society’s Compliance Officers will contact principals directly should this be necessary.

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