2024 – The State of the Solicitors Profession A Year in Review

I wish we could say that we’re tip-toeing into Christmas, but 2024 being the way it was, a better selection of adjectives would be “raging” or “racing” into Christmas.

It’s getting a little old hat to say what a phenomenally busy year it has been for our solicitor firm clients and us at cpm21.

As is our tradition at this time of year, we will reflect on the main events of the year, and the effects they have had on solicitors firms.

The two previous end of year articles mentioned the War in Ukraine, which is still on-going, but it isn’t the only conflict out there and the world has become a very uncertain place.

At home, we still have a cost-of-living crisis, which has not been eased by a new government, and the effects of its budget will be felt more in 2025 with the additional tax burden on employers that will come into full effect.

Just another year then.

What 2024 brought…

If we start with the Solicitors Regulation Authority, then it brought what they promised in the previous year.

• Even more Money Laundering Audits (including Proliferation Financing) – with a 350% increase in desktop audits.
• Sanctions Checks
• Even more SRA Transparency Rules Audits
• More fines, with some of the more notable being a percentage of a firm’s turnover.
• A requirement for a COLP AML data collection questionnaire and declaration.
• The beginning of Client Accounts Rules “Spot Checks”.

As well as that, we had;

• The Legal Services Board Axiom Ince report findings
• The possibility of the SRA regulating CILEX practitioners
• Consultations on the removal of Client Accounts for Solicitors

The Axiom Ince report findings are particularly important, as they appear to have significantly influenced the Regulator’s thinking.

The Axiom Ince Report

Probably the easiest way to summarise the criticism that arose from the LSB regarding the SRA in this is to quote the following;

“The review found that, in the lead-up to the SRA closing Axiom Ince in October 2023:

• The SRA did not act adequately, effectively and efficiently,
• The SRA did not take all the steps it could or should have taken, and
• The SRA’s actions and omissions in this matter necessitate change in its procedures to mitigate the possibility of a similar situation arising again.”

So how has this influenced the SRA’s thinking?

We can start with the SRA’s “Consultation on potential changes to how client money is handled in the legal sector” which you can view here.

Three of the aims of the consultation are to understand;

• “Whether in a digital age, and with feasible/credible alternatives becoming more available which may be better at safeguarding client’s money, in the longer term is it still necessary or desirable for firms to hold client money as widely as currently the case, or at all.
• If rules around interest earnt on client accounts, or how long firms can hold client money after the end of a case, need changing so they better serve client’s interest.
• If changes are needed in terms of the controls, checks and balances firms are obliged to have in place to protect money held in client accounts. This includes obligations regarding accountants’ reports and certain rules regarding control and oversight over client money.”

The consultation is on going until February 21^st 2025 but in the background the SRA is already planning Accounts Rules “Spot Checks,” and our clients have started to have notifications that these will take place in 2025.

You can read more about this here.

The following quote from the above summarises what the regulator’s intentions are;

“We will therefore be conducting spot-checks on a number of firms in the New Year to make sure that they have obtained a recent accountant’s report. Firms being asked to take part in the exercise will receive an email in December advising you of what will be involved. We will then contact you again in January once the window for returning the required information is open.

For those firms contacted, providing a reply to this request will be a regulatory requirement.”

There is another potential implication from all of this, and that is the return of the obligation to provide an annual Accountant’s report to the SRA. The Regulator hasn’t said that it will return to this, but given the fall out from Axiom Ince, plus the results of their findings from the planned spot checks, this could well be something that could happen in 2025.

Money Laundering Audits

This has been a feature in our end of year articles for the last three years. The SRA have significantly ramped up the frequency and number of audits. These audits include face to face audits and desktop audits. Couple this with continued LSAG Addendums and updates along with Government regulation changes and legal firms continue to face the most challenging AML regime they have ever faced.

More on this in the SRA AML Annual Report for 2023.

New to the SRA AML process this year are the checks on whether firms have carried out a Proliferation Risk Assessment in line with the LSAG Guidance issued in April 2023 which you can read more about here;

As we also mentioned in 2023, the Economic Crime and Corporate Transparency Bill has now come into effect, however its effects have been limited to large firms.

Financial Sanctions

The SRA asked firms to declare whether they check new clients are on the OFSI sanctions list in their AML questionnaire earlier this year which was sent to the COLPs of solicitors firms. Many of these who work in firms which are not in the scope of the Money Laundering Regulations 2017 have been shocked to find that it applies to all law types, including Family, Immigration and Criminal work.

The SRA have said that they will audit firms for Sanctions procedures in 2025, so make sure your firm is carrying these out and evidencing them appropriately on the matter files….

SRA Transparency Rule Audits

https://www.sra.org.uk/solicitors/standards-regulations/transparency-rules/

The Regulator continued to audit websites of firms to determine whether they were compliant with these rules, and in some cases fined the firms – this has taken the form of a fixed fee fine of £750. The SRA has also stated that it will continue to audit websites for non-compliance and issue fixed penalty fines for those firms that are non-compliant.

The SRA has recently published new resources to help firms comply with the Transparency Rules, and you can read about this here;

There is always the possibility that Transparency Rules will be extended to cover areas of Law that are not already included, such as Family, Wills, LPAs etc, so firms may wish to consider how they might respond should this happen.

Anyone else wondering what happened to the SRA “Light touch” regulation promised with the move away from Outcomes Focused Regulation in 2019?

Conveyancing Quality Scheme

The speculation that a new version of Core Practice Management Standards would be unveiled in 2024 did not materialise, but the same speculation exists for this in 2025, although there is the possibility that any changes will be muted, considering the issues encountered by the Law Society when it tried to introduce the updated TA6 Seller’s Information Form earlier this year.

Lexcel Version 7

The much-anticipated update to the Law Society Lexcel Legal Quality Practice Mark that was scheduled to be introduced in 2024 did not materialise. Our view on whether this will be introduced in 2025 is that it must be, because if not it may damage the credibility of the standard considering that the current version, Lexcel V6.1 was introduced on November 1^st 2018, and it’s relevance has been eroded by a new SRA Code of Conduct introduced in 2019, and the rapid changes in such things as Money Laundering and Sanctions Regulations.

The Legal Aid Agency

This was a busy year for the Legal Aid Agency with the Civil Tender rumbling on from 2023 into 2024, and the 2025 Crime Contract Tender opened. It is interesting that the Legal Aid Agency will be allowing interim tenders for both over the next several years, so the usual scramble for either should be a thing of the past for a while.

One thing in particular to note for Criminal firms is the requirement to achieve Cyberessentials accreditation as part of the tender requirement, but also, something many have not noticed is the requirement for successful firms to ensure that their suppliers are also accredited to Cyberessentials. This means such suppliers as interpreters, forensic scientists, DNA tracing services etc.

The cpm21 year…

While Lexcel support remained our biggest area of demand and saw further expansion in Wales, London, Manchester and North West England, it was for the first time in our history, matched by another service – Money Laundering Support.

With the SRA so heavily engaged in auditing firms and collecting AML questionnaires, we have been working with firms on their AML Policies Controls and Procedures, including their Practice Wide Risk Assessment, supporting SRA on site and desktop audits, carrying out Regulation 21 Independent Audit Functions, AML and Financial Crime training and generally dealing with queries from firms related to AML.

We have also helped firms with responses to SRA Transparency Audits, ensuring that client firms respond in time to prevent being fined by the Regulator, and carrying out our own audits of client websites to ensure that firms who haven’t been audited are compliant for any SRA check on their website.

In terms of statistics, if we were to add up all of the work we have carried out to help firms with their Money Laundering Regulatory obligations, then it would be our number one category of work in 2025, representing a significant change to us as an organisation, one that we’re pleased to say we dealt with well for our clients.

As we noted earlier, there has been a lot of Legal Aid Agency activity around tenders this year, and we supported multiple firms with applying for Tenders and ensuring they are compliant with the LAA verification requirements.

Another area of service expansion in 2024 was our outsourced file review service which saw our consultants review even more files than the previous year, in fact, the number of file reviews we dealt with would be in the thousands for the first time in our history, another milestone for us.

We could not fail to mention complaints handling. Our outsourced complaints handling service continued to deal with several hundred complaints where files were investigated to determine whether there was any substance to a complaint, suggested responses prepared for firms, or collating and supporting responses to the Legal Ombudsman, and on one or two occasions the SRA where the regulator had received a complaint regarding the behaviour of a Solicitor firm.

We provided face to face and online, public and private training courses, with the usual topics such as Complaints Handling, Business Strategy, Legal Aid Supervision, Anti-Money Laundering, Data Protection, CQS and Lexcel compliance, Fraud, and Equality Diversity and Inclusion, but also new courses on Safeguarding to meet the requirements of the Legal Aid Agency Specialist Quality Mark.

2025 – The shape of things to come…

The one thing we have said ever since we began writing these articles about working in the legal profession is that the pace of change is relentless, and 2025 looks to be no different to other years in that regard.

These are the things we think firms need to watch out for next year;

1. Anti-Money Laundering

We expect a continuation of the SRA’s approach to all things Money Laundering, with audits continuing and increasing over the year. The concern we have that remains since last year for our clients is that the SRA may interpret the LSAG guidance on the subject differently to how firms do, with the consequential punitive actions that may lead them to take. Our view for 2025 is still very much that Anti-Money Laundering compliance is the highest risk for firms operating within the MLR regulated sector, and we may be due an update in the LSAG guidance.

Lexcel Version 7

It appears that this long overdue update may actually happen in 2025. We know it’s panto season, and we can hear the thoughts of Lexcel accredited firms who are reading this… “Oh no it won’t…”

In our view it is time for the version to change in line with the changes that have abounded since it came into effect in 2018.

2. Legal Ombudsman Scheme – Change to the Case Fee?

The Legal Ombudsman is consulting on a change to its case fee, from £400 to £800.

Leaving aside the organisation’s poor performance and turnaround of complaints, the thinking is that it will encourage firms to resolve complaints earlier.

If you want a say on this consultation, which is part of the Legal Ombudsman’s business plan and budget consultation, then you can view it here.

3. The New DPDI (Data Protection and Digital Information) Bill

We mentioned this in our last article, so as a reminder, this new bill, in the words of the former Secretary of State for Science, Innovation and Technology, Michelle Donelan “will do away with a bulky, overly complex, one-size-fits-all European Law with “an agile, British, bespoke, common-sense alternative that is tailored to the needs of [British] businesses and our culture”.

The legislation seeks to amend (among other laws) the UK GDPR, the DPA 2018 and the PECR.

There appears to be a silence on this at present, and the update on the relevant parliamentary website states it is in “committee stage” in the House of Lords, so we wouldn’t anticipate it being introduced until mid-2025.

When it does happen, it will mean changes to solicitor firms Privacy Notices, Client Care/Terms of Business Letters, Information Management & Security and related policies to comply with it.

4. Artificial Intelligence

“Skynet begins to learn rapidly and eventually becomes self-aware at 2:14 a.m., EDT, on August 29, 1997.” Terminator 2 1984 Movie

I’m pleased to say that “Skynet” has not become self-aware and bombarded the planet with nuclear weapons, so the plot of terminator hasn’t unfolded. Yet. But we may be close to seeing robots being introduced to society via the Tesla Bot Optimus which resemble the robots in “I Robot” more than terminators.

Be that as it may, AI is still a hotly debated subject, and the risks with its use identified by the SRA’s Risk Outlook on the subject still stand.

https://www.sra.org.uk/sra/research-publications/artificial-intelligence-legal-market/

An aspect we covered previously was the client perception of value based on what a firm is using AI for, and whether they are willing to pay the same rates for the outcome if some of it is delivered by AI, or whether it will lead to a massive competition between legal services providers which is sort of covered in this article from Legal Futures;

https://www.legalfutures.co.uk/latest-news/ai-use-among-lawyers-soaring-but-impact-on-fees-uncertain

All in all then, it looks like 2025 will be another very busy year in the profession…

17 years of support which will always be there for you…

At cpm21 we are very proud of our record in supporting solicitors with their regulatory and management support needs, and 2024 was our 17^th year of doing so.

We are also very proud of our team in helping achieve this.

2025 looks like another year of uncertainty facing the UK and the solicitors profession, however, if you are one of our clients, or a future client, then there is one thing that you can always be certain of.

We will be there to support you with independent and impartial compliance services.

Merry Christmas and a Prosperous New Year from the cpm21 team, we’ll see you in 2025.