Legal Services Flashcards
What are the 7 umbrella regulators under the Legal Services Board (LSB)?
- The SRA
- The Bar Standard Baord
- CILEX
- The Intellectual Property Regulation Board
- The Council of Licensed Coveyancers
- Cost Lawyers Standard Board
7 The Master of the Faculties (regulates notaries)
What are reserved legal activates?
Activites only those regualted by the authoirse bodies above can undertake:
- Exercise a right of audience
- Conduct litigation
- Reserved instrument activities
- Probate activates
- Notarial Activities
- Administration of Oaths
What is the requirement for Professional Indemnity Insurance for firms?
Minimum coverage is £2 or £2 million per claim depending on legal structure of regulated activity
Must ensure the coverage is adequate and appropriate
What factors can determine adequate and appropriate coverage?
Type of client
Value of matters
Transparency of information provided
Claims history of the firm
What is the insurance requirement for Freelance Solicitors?
If they dont carry reserved legal activity:
- dont need authorisation and therefore no need to provide indemnity insurance
if carrying out a reserved legal activity:
- must have 3 years PQE
- Must not hold client money
- Must take out and maintain adequate and appropriate insurance (does not need to meet minimum SRA req.)
- must notify SRA of freelance status
What is the insurance requirement for Solicitors in Non-Commercial Bodies?
e.g. NFP org, charities, independent traded unions, community interest companies
Solicitor must ensure the BODY takes out and maintains indemnity insurance with adequate and appropriate coverage.
What is the SRA requirements for a Solicitor on the issue of costs?
- To be transparent on costs
- inform likely costs at offset
- Continue to update the client on costs
- Advise the client on relevant funding mechanisms
What kinds of funding is available in Non-Litigation Matters?
- Private Funding: solicitor asks for a sum up front ‘on account’ of costs.
- Fixed Fee Funding:
What funding is available for Litigation Matters?
- Private Funding
- Conditional Fee Arrangement
- Damages Based Agreement
- Third Party Funding
- Other Forms of Funding:
- Legal Expenses Insurance
- Union Cover
- Civil/Criminal Legal Aid - means and merit test
What is a Conditional Fee Arrangement?
‘no win, no fee’
If Claim is Unsuccessful:
- client does not pay fees
- however, client may have to pay opponents costs and disbursements + solicitors disbursements
If Claim is Successful:
- Solicitor entitles to usual fees + disbursements (can recover from losing party)
- Entitles to recover a Success Fee from their client - expressed as an agreed upon percentage of the solicitors normal fee
What are the limitations of a Conditional Fee Arrangement?
- Solicitor cannot get success fee exceeding 100% of their normal fee
- Cannot be used in family proceedings
What is a Damages Based Agreement?
Claim Unsuccessful:
- solicitor not entitled to any fee or repayment of disbursements
Claim Successful:
- Solicitor entitled to a speicified percentage of the client’s damages award
- if other side pays costs, any amount other side pays will be deducted from what the client owes
PERSONAL INJURY CASE: legal costs payable can not be more than 25% of sum recoverable
NON-PERSONAL INJURY: Sum payable cannot exceed 50%
Success: term must be defined in agreement and must explain what happens if adverse costs are awarded and how to terminate agreement
What is Third Party Funding?
When third party covers the fees and disbursements (barrister fees, courts fees, after the event insurance) but not the other sides costs
Success:
Funder will be paid awards made to the party (make profit 15% - 45% more than actual costs)
Unsuccessful:
Funder will bear the costs it has agreed to fund
It was held by the Supreme Court in the recent case of PACCAR Inc & Others v Compensation Appeal
Tribunal & Others that third party funding agreements fall within the definition of damages-based
agreements and therefore they need to satisfy the same conditions to be enforceable.
What is Legal Expenses Insurance?
Before the Event Insurance
- solicitor should check if client has this
- common in road traffic cases as B/E is part of car insurance policies
- insurer pays the solicitor’s legal costs
- often requires insured party to use a ‘designated solicitor’
After the Event Insurance
- after an accident or event
- in exchange for insurance premiums, insurance company will pay cost of disbursements
- covers risk of having to pay other sides costs if claim unsuccessful
- associated with conditional fee
What is Civil Legal Aid
- Legal Aid: public funding
- If available, solicitor cannot accept claim as public funding available only through firms contracted with Legal Aid Agency
- must meet the merit and means test
- limited to specific disputes (housing, family, debt issues)
- can be withdrawn if there is changes to merit
What are the protected characteristics covered in the Equality Act 2010
- Age
- Disability
- Gender reassignment
- Marriage and Civil Partnership
- Pregnancy and Maternity
- Race
- Religion or belief
- Sex
- Sexual Orientation
What is the difference between direct and indirect discrimination?
Direct: treating A less favourably than B because of a protected characteristic (can also be due to association, wrongful perception or treated as one)
Indirect: when a policy or provision is apparently neutral but puts protected characteristics at a disadvantage.
Is there any Justification for Direct or Indirect Discrimination?
Direct - no justification except in age and disability - these can be justified if it is shown to be a proportionate means of achieving a legitimate aim
Indirect - can justify any indirect discrimination by showing it is a proportionate means of achieving a legitimate aim.
What are the 3 Stages of Money Laundering?
- Placement - placing the money in the financial system
- Layering: hiding the origin of proceeds/audit trail by passing them through complex transactions
- Integration: Make them appear as legitimate
When might a Solicitor get involved in money laundering?
In the layering and integration stage
What institutions are charged with enforcement of the POCA (Proceeds of Crime Act 2002)
The National Crime Agency
In general what is the scope of the POCA?
Applies to all persons although offences such as tipping off or failure to report apply to regulated sector (those dealing with financial or real property transactions)
Predicate Offence: assume that criminal offence has occured in order to generate criminal property being laundered. (no conviction needed)
Conspiracy and Aiding and Abetting
offence to conspire or attempt to launder the proceeds of crime or counsel, aid abet, procure
What is the maximum penalty for a principle money laundering offence?
14 years imprisonment and/or an unlimited fine
What are the principle money laundering offences under the POCA? (Direct Involvement)
- Concealing
- Arranging
- Acquisition, Use or Possession
What is the offence of Concealing? (POCA)
To conceal, disguise, convert or transfer criminal property or transfer criminal property
Mental State: offender must KNOW or SUSPECT that criminal property represents a benefit from criminal conduct
What are the Defences for Concealing?
- Authorised Disclosure by the Offender
- defence if person makes an authorised disclosure to police (NCA), customs officer, nominated officer (MLRO)
Must be made before prohibited act but if made during, disclosure will be a defence if:
- no relevant knowledge
- made as soon as practicable
- made on own initiative (not through encouragement of another)
NOTE: disclosure here is exception to general duty to keep confidences.
- Privilege Excuses Not Disclosing
- Solicitor excused from duty to disclose if Professional Privilege (pp) applies
- PP does not apply if solicitor knows transaction will constitute ML
- If they suspect and it is correct, communications are no longer privileged.
What is the offence of Arrangement? (POCA)?
Covers layering and integration stage
Arrangement which the defendant knew or suspected facilitated the acquisition retention, use or control of criminal property by/on behalf of another person
NOTE: Solicitor does not have to know, enough to just SUSPECT to commit this offence
What are the Defences/Exceptions for Arrangement?
Same as Arrangement:
1. Authorised Disclosure by the Offender
2. Professional Privilege Excuses Not Disclosing
EXCEPTION. Ordinary Litigation and Other Dispute Resolution Exception
- offence does not cover orindary conduct of litigation up until final disposal
- other forms also not arrangement (ADR, tribunals)
BUT: SHAM litigation would constitute offence
What is the offence of Acquisition, Use or Possession?
it is an offence if a person acquires, uses or has possession of a criminal property (possession meaning physical custody)
What are the Defences for Acquisition, Use or Possession?
Same as Concealing, Arranging:
1. Authorised Disclosure
2. Professional Privilege Excuses Not Disclosing
AND
3. Adequate Consideration:
- defence if property was acquired, used or possessed for adequate consideration - a person paid good amount, in good faith, for an item they did not know was stolen.
What are the INDIRECT involvement offences for money laundering?
- Failure to Report
- Tipping off
- Prejudicing an Investigation
What is the Indirect offence of Failure to Report?
- Solicitor has obligation to disclose ‘suspicious activity reports
- Disclosure must include: any information obtained in course of business
- Time: as soon as practicable. delay acceptable if it arises from solicitor taking legal advice
- MENTAL STATE: possible to commit offence by failing to report information which raises reasonable grounds for suspicion (OBJECTIVE TEST) person SHOULD HAVE KNOWN or been suspicious
- solicitor should be wary of the following methods:
- transfers between bank accounts
- buying investments and cashing them
- overpayment of tax
- depositing money then requesting return of funds
What are the Defences for a Failure to Report?
- Privilege or Privileged Circumstances
- including: information that came to solicitor from:
- client (or rep) in connection to legal advice
- client (or rep) seeking legal advice
- person in connection of legal proceedings or contemplated LP.
What is the 2 offences of Tipping Off under the POCA?
- Disclosing to a third party that a suspicious activity report has been made - if that disclosure might prejudice investigation
- Disclosing an Investigation to a third person
EXCEPTIONS:
- Normal Enquiries about instructions and Retainer
- Language Included in Standard Terms of Engagement (e.g. to include a paragraph about their obligations under MLA)
What are the Defences for Tipping off?
- Disclosure within an undertaking or Group
- also if made to another legal professional in a diff undertaking if: carry common owenership or carry business in a country that imposes equivalent ML req. - Disclosure between institutions
- made to another LEGAL professional
- relates to a client or former client of both parties or involving them both
- made to prevent ML
- both have equal professional duties of confidentiality - Other Disclosures
- Disclosure made to a supervisory body or for purpose of prevention
- Disclosure made to client for the purpose of dissuading the client from engaging in conduct amounting to offence
What is the offence of Prejudicing a Investigation?
Committed when:
- a person knows or suspects a money laundering, confiscation, civil recovery investigation is being/or about to be conducted
- makes a disclosure to person likely to prejudice investigation
- falsifies, conceals, destroys documents relevant to investigation
What are the defences for Prejudicing an Investigation?
- Person making disclosure did not know or suspect
- that the disclosure would be prejudicial, documents were relevant and did not intend to conceal any facts - Disclosure made in connections with legal proceedings
- provided it was not made with intention of furthering criminal purpose
What do the Money Laundering Regulation 2017 outline?
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulation 2017 outlines:
specific customer due diligence requirements to know clients and monitor use of service by clients
What is a regulated activity under the ‘Regulations 2017’ in which there is a risk of money laundering ?
- buying or selling real property or business entities
- managing client money, securities, other assets
- organising contributions necessary for creation, management of companies
- creating, operating, managing trusts, companies, foundations or similar structures
What would not be considered in participation of a financial transaction? (under money laundering)
- Payment on account of costs to a legal professional/or LP’s bill
- provision of legal advice
- Litigation or ADR
- Will-writing (consider if tax advice is covered)
- Word funded by the Legal Services Commission
What Procedures must be established to deter money laundering?
- Internal controls, policies, procedures: customer due diligence in compliance with MLR
- Identification: client and/or beneficial owner
- Recordkeeping: Minimum 5 years
- Recognising and Reporting: nominated officer (MLRO) who reports to authorities
- Training: job of nominated officer. at regular intervals and in context of law and business
Who is the nominated officer and what are their duties?
Role taken by sufficient senior individual in a position of sufficient responsibility
Duties:
- Reporting to authorities: this cannot be subject to consent of anyone else
- Acts as the central point of contact between firm and NCA and liaises with NCA
- Assessing internal reports, making further enquiries, filing SAR with NCA
- Responsible for training, advising and designing internal Anti ML systems/policies/controls
Who’s responsibility is it to report to the nominated officer and what should you do if they are away?
The individuals responsibility to report
If away, best practise is to make alternative arrangements (deputy)
If no alternative arrangement, solicitor must report suspicions directly
What happens after submitting a SAR?
NCA has 7 days to review SAR and ask for information
During notice period, act which may be money laundering must not be carried out but other activities on same file can be carried and letters can continue
If NO REPLY after 7 days, act can take place
If NCA REFUSES consent, 31 moratorium period in which nominated officer cannot allow act to take place but other steps can be (as above)
In what circumstances must due diligence be conducted?
In the following transactions,
1. establishing a business relationship with client
2. any client proposes to enter a transaction amounting to equivalent of more than 15,000 euros
3. any time you suspect money laundering or terrorist financing
4. any time solicitor has reason to doubt veracity or adequacy of documents or data previously submitted by client
What is the SRA recommendation for best practise?
- Meeting clients in person to verify ID
- Use a client account to hold client funds for legal transaction only
- Investigate further when transaction involved cash or high risk jurisdiction
- Take advice from MLRO
- Submit clear and accurate SARs
What is the general prohibition of the Financial Services and Markets Act 2000 (FSMA)?
No person may carry on a regulated activity in the UK unless they are authorised or exempt from authorisation
What is a regulated activity under the FSMA (Regulated Activities) Order 2001?
A regulated activity is a specified activity in relation to a specified investment, which is carried out in the course of business, and no exclusions apply.
This includes: (ADAMS)
Advising
Dealing as an agent
Arranging
Managing
Safeguarding
What is a specified investment under the FSMA (Regulated Activities) Order 2001?
Funeral Plans
Mortgage contracts
Debentures
Insurance Contracts
Pension Schemes
Shares in a company
What activites are EXCLUDED from the FSMA
None of these exclusions apply to insurance contracts or insurance policies:
TAKEOVER:
- client on buying or selling with 50% or more of the voting shares
- or transaction otherwise regarded as taking control of daily running of company
ACTING AS A TRUSTEE, NOMINEE, PERSONAL REPRESENTATIVE
INTRODUCING OR ACTING THROUGH AUTHORISED PERSON
REASONABLY REGARDED AS NECESSARY EXCLUSION
- will not violate if activity carried in relation to specified investment that might otherwise be a regulated activity if it can be reasonably regarded as a necessary part of providing the legal service
- activity cannot be billed separately from main legal advice
- cannot be managing asset
What is the Exemption to general prohibition?
Member of Designated Professional Body
- SRA
- if solicitor provides financial service advise which arise out of the legal service provided, the manner and scale is incidental to the provision advice
- lower threshold than incidental activity
Incidental Activity (Reasonably Regarded as Necessary)
- providing financial service that is incidental to firms work as a whole
- does not receive compensation unless accounted for to client
What are some Limitations to the Incidental Activity exemption?
- does not extend to activities contained in SRA Financial Services Scope Rules 2019
- does not extend to Non-Exempt Activities Order
- must inform clients that the firm is regulated by the SRA not the Financial Conduct Authority
