2 - Managing Client Relationships: The 3 Cs Flashcards
What are The Three Cs
- Customer Due Diligence
- Conflict check
- Client Care letter
What is Customer Due Diligence?
CDD refers to the identification and verification of your client under the Money Laundering Regulations 2017 (MLR).
When:
- Establishing a business relationship
- Carrying out an occasional transaction
- Suspecting money laundering or terrorist financing (Regulation 27 MLR)
What & How:
- Identify your client (name, address).
Verify their identity using:
Original documents (passport, utility bill)
Conducting electronic verification (with guidance from the Law Society)
Obtaining information from regulated persons (e.g., solicitors or banks)
In practice, firms usually prefer to verify themselves rather than relying on others.
In practice:
Be aware of your firm’s CDD/‘know your client’ policy.
Ensure checks are carried out before acting for a new client.
What is a conflict check?
An SRA requirement to ensure no conflict of interest exists at the outset of an instruction (CCS/CCF 6.2).
You must not act where: There is a conflict of interest (e.g., own interest conflict or conflict of interest between clients i.e., representing both sides of a transaction or dispute).
A conflict check ensures compliance with SRA principles:
- Principle 2: Uphold public trust in the profession.
- Principle 3: Act with independence.
- Principle 7: Act in the client’s best interest.
CCF requires firms to have effective governance systems and controls to ensure compliance with SRA requirements.
How can law firms ensure that there are no conflicts in place at the outset of an instruction?
- Check whether work conflicts with own interests or work for another client.
- If working for an international firm, check whether the work conflicts with that of another office overseas.
- This conflict check should be conducted when taking instructions from new and existing clients.
What is a client care letter, and when is it sent?
A letter sent to the client at the start of the matter, setting out the terms of the solicitor’s engagement.
Why do law firms send client care letters?
Law firms send client care letters to:
Clarify the solicitor’s role: Help clients understand what solicitors are doing and why.
Promote fair treatment (CCS 1.1): Ensures solicitors treat clients fairly by outlining terms and conditions.
Meet SRA requirements:
- Complaints procedure (CCS 8.3)
- Costs and pricing (CCS 8.7)
- Information on how the case will be handled (CCS 8.6)
Prevent misunderstandings: Reduce disputes over fees, services, and expectations
What are the requirements for competence and level of service under the SRA Codes?
Competent and timely service: Ensure services are competent and delivered promptly (CCS 3.2, CCF 4.2).
Only act for clients on instructions from the client, or from someone properly
authorised to provide instructions on their behalf. If you have reason to suspect that the
instructions do not represent your client’s wishes, you do not act unless you have satisfied yourself that they do. (CCS 3.1
Maintain professional knowledge: Keep your skills and knowledge up to date (CCS 3.3).
Client’s needs: Take account of the client’s attributes, needs, and circumstances (CCS 3.4, CCF 4.2).
Supervision and accountability:
Remain accountable for work done by others (CCS 3.5(a)).
Effectively supervise the work of others (CCS 3.5(b)).
Team competence: Ensure those you manage are competent and maintain knowledge of legal, ethical, and regulatory obligations (CCS 3.6).
Firm obligations:
Ensure managers and employees are competent and up to date (CCF 4.3).
Maintain an effective system for supervising client matters (CCF 4.4).
What are good reasons for terminating the client’s retainer?
Lack of clear instructions: Conflicting instructions from the client, making it impossible to proceed.
Breach of law or Codes: Continuing representation would violate legal or ethical obligations (e.g., conflict of interest).
Non-payment of fees: If agreed in a contract, non-payment of interim bills can justify termination.
Can a solicitor terminate a retainer for self-interest?
No, termination must comply with the following principles:
- CCS/CCF 1: Treat the client fairly.
- Principle 7: Act in the client’s best interests.
- Principles 4 & 5: Maintain honesty and integrity.
How must information be presented in a client care letter?
Key obligations under CCS 8 include:
CCS 8.6: Provide information in a way clients can understand, enabling them to make informed decisions about the services, how the matter will be handled, and available options.
CCS 8.10: Ensure clients understand:
Which services and activities are regulated by the SRA.
What activities you or your firm are authorized to carry out.
That any non-SRA regulated business (e.g., separate businesses) is not misrepresented as regulated.
CCS 8.11: Ensure clients understand the regulatory protections available to them.
Information should be:
- Transparent: Clearly explain what services you are providing.
- Timely: Delivered promptly, typically via a detailed client care letter after receiving instructions on a new matter.
- User-Friendly: Follow SRA guidance on presenting information in a way that is easily understandable.
How must information on costs be presented in a client care letter?
Transparent details and best possible information about pricing and potential costs.
Information about likely cost increases during the matter.
Clear explanations in a way the client can understand to avoid misunderstandings. (CCS 8.7)
Publicity is accurate and not misleading, including that relating to charges and the circumstances in which interest is payable (CCS 8.8)
Practical Point:
Monitor your costs throughout the matter:
- Simple tasks can become complicated, potentially increasing costs significantly.
- Keep clients informed of any changes, explain possible outcomes, and manage their expectations, especially if costs could increase.
What information on complaints should be included in the client care letter?
CCS 8 requires that you:
CCS 8.2: Ensure you establish and maintain (or participate in) a procedure for handling complaints related to your legal services.
CCS 8.3: Inform clients in writing at the time of engagement about:
- Their right to complain about your services and charges.
- How and to whom a complaint can be made.
- Their right to complain to the Legal Ombudsman and when that right arises.
What are a clients rights if a complaint has not been resolved?
CCS 8.4 (applies to firms by virtue of CCF 7.1) - If a complaint is unresolved within 8 weeks of the complaint being made, the solicitor must inform the client in writing of:
- Right to Complain to the Legal Ombudsman:
The client’s right to complain to the Legal Ombudsman.
The time frame for doing so.
Full details on how to contact the Legal Ombudsman.
- If a Complaint has been brought and the Complaints Procedure is Exhausted:
That you (the firm) cannot settle the complaint.
The name and website of an alternative dispute resolution (ADR) body which would be competent to deal with the complaint.
Whether the solicitor agrees to use the ADR scheme (CCS 8.4).
You ensure that complaints are dealt with properly, fairly, and free of charge (CCS 8.5).
Do you need to send a client care letter for repeat business?
If the client is established and you’re performing repeat work on agreed terms, you may not need to repeat all the information each time a new file is opened.
Some firms send annual client care letters to established clients and shorter letters when instructions are received for a new matter.
For example, a property developer may have a fixed fee arrangement, and a lawyer may only need to acknowledge receipt of instructions for each new transaction if the annual letter already covers relevant standards from the Codes.
What are the contents of a client care letter?
Although not required by the SRA Codes, it helps demonstrate compliance with CCS 3, 8.3, 8.6, and 8.7:
- CCS 8.3: Inform clients in writing about:
Their right to complain about services/charges.
How and to whom complaints can be made (including the Legal Ombudsman).
Since clients need to be informed in writing at the time of engagement about the firm’s complaints procedure, most firms show they have complied with this by including it in their client care letters. - CCS 8.6: Provide clear information to help clients about how their matter will be handled and the options available to them to make informed decisions about the services they need.
- CCS 8.7: Ensure clients understand pricing, costs, and any changes as the matter progresses.
Overall, should include information about:
- Confirmation of your client’s instructions and options.
- General information on each party’s responsibilities.
- The complaints procedure.
- Who will handle the case.
- Regular updates.
- How pricing and costs will be managed throughout the matter.
