This year’s SRA Compliance Conference opened with a sense of tension in the wake of recent scandals. There was an expectation from the opening conversation with the Chair and Chief Executive to shed some light following the Axiom Ince debacle, which resulted in the disappearance of £64 million in client funds and the 1400 who lost their jobs.

This expectation was met with disappointment as the SRA were quick to dismiss allegations of its own negligence stating that the issue with Axiom revolved around an individual rather than their own actions, with Anna Bradley announcing that this is now history, and we should move on.

A statement received by a frustrated audience, seeing as the fallout from this fraud has required already struggling firms and solicitors, to pick up the bill by increasing their annual contributions to the Solicitors Compensation Fund by 270%.

Instead, it was announced that the SRA’s ongoing focus will be the continued investigation into the post office scandal, bulk litigations and conducting a review into consumer protection following the Axiom report (a consultation into ‘client money in legal services’ which is now open). A new ‘data strategy’ was also introduced, where more of a focus will be put on data collection throughout the sector to better identify firms doing specific services.

The rest of the conference included a series of breakout sessions and workshops, one of which was the use of AI and Tech in law firms.

A topic that is showing increasing interest as of late (a statement that was reflected in the size of the audience), especially with public access to AI with platforms such as ChatGPT. The use of technology in firms overall, appears to be facing less scepticism after increasing adoption.

The session covered the changes currently being seen in the industry, the challenges for small firms when it comes to adoption and safety concerns with its use. The message shared from the panel (which seems to be a recurring theme) was to first define the problem your firm is trying to solve before looking for a solution. What is the issue? Can it be solved with existing tools? These are the type of questions which should be asked before looking for new providers.

It was also advised that firms should not sign contracts longer than 12 months with their providers and should consider taking an initial trial with their preferred system to see if it’s a right fit for them.

When it came to discussing the use of AI in practice, it was advised that you should get an (AI) policy in place outlining its usage as a form of guardrail for staff. Additionally, it was suggested that users should avoid inputting client information into these systems and to avoid searches regarding legal knowledge because of the uncertainty of its output.

There seemed to be a shared sense of relief when it was mentioned that there has been no interest in replacing roles with ‘AI agents’, stating that a human element must be involved in the cycle to add context to the results and consider the client’s unique situation.

Questions from the audience were also centred around AI, asking what AI is, its benefits, and the risks involved. The main use of the technology had been described to recover time from document reviews that would lead to a focus on the client.

One of the panellists commented that junior lawyers could be solicited for advice on the latest technology as they are surrounded by it and have the knowledge, which could be a great opportunity for juniors to set themselves apart early on in their career.

After a few varied sessions in between, the event finished off with its headline act of financial crime. It has been said that firms should expect increasing scrutiny (a recurring theme for these events), more so this upcoming year to follow through with the increasing powers granted by the Economic Crime and Corporate Transparency act and the expectation placed on the SRA by the government to follow through with these political commitments.

There will be a particular focus on preventing sanctions evasion using professional enablers and prevent money laundering through the use of corporate structures. In addition, the UK’s impending mutual evaluation by the Financial Action Task Force (FATF) will drive additional pressure on the SRA to act.

Especially after a recent report from DNFBP concluded that there were a lack of enforcement and convictions from the regulators, it has now emboldened the SRA to take more action against breaches.

Overall, this conference provided perfect opportunities for compliance professionals to connect, learn, and share advice and concerns with fellow professionals whilst catching up with old colleagues.

The key takeaways from this event would be:

• the SRA’s increasing interest into the management of client accounts.
• identify your firm’s needs before acquiring new technology.
• provide clear guidance for the use of AI technology in your firm and create safe environments for testing.
• double down on your AML compliance to avoid being stung by increasing fines

The final point signalling the SRA’s commitment to upholding the trust and confidence in the sector and their ongoing battle against money laundering.

Virtual Conference – 25-28 November 2024

If you could not make this event in-person, these sessions have also been recorded and will be made available during the compliance officers virtual conference at the end of November, and thereafter. (Click here to attend the virtual sessions.)

SRA Consultation

The SRA has an open consultation on Client money in legal services – safeguarding consumers and providing redress: The model of solicitors holding client money. The consultation is open for response until the 21 February 2024. Click here for more.