The Three Cs

Question 1

What are the three cs?

Answer 1

• Customer due diligence
• conflict check
• client care letter

Question 2

What is CDD and when do you do it?

Answer 2

CDD: identifying your client and verifying their identity on the basis of documents, data or information form a reliable source.

Must carry out CDD when:
- establishing a business relationship
- carrying our an occasional transaction
- suspect money laundering or terrorist financing

Question 3

Identification and verification

Answer 3

Identification of a client: simply being told or coming to know a client’s identifying details e.g. name and address

Verification: obtaining some evidence which supports the claim of identity
Verification can include:
- Obtaining or viewing original documents eg passport
- Conducting electronic verification
- Obtaining information from other regulated persons

Question 4

What is the purpose of a client care letter?

Answer 4

Although not required they are used to satisfy provisions of CCS:

CCS 8.3: ensure that clients are informed in writing at the time of engagement about:
- their right to complain about your services and charges
- how a complaint can be made and to whom
- any right they have to make a complaint to the Legal Ombudman

CCS 8.6:
- give clients information in a way they can understand
- ensure they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them

CCS 8.7:
- ensure that clients receive the best possible information about how their matter will be priced
- and both at the time of engagement and as their matter progresses about the likely overall costs of the matter and any costs incurred

Question 5

Why do a conflict check?

Answer 5

Because CCS 6.2: you do not act where there is a conflict of interest

Question 6

Can you accept client’s instructions if you would be breaching the law?

Answer 6

No. If your client asks you to commit a fraud for example you would not be able to act.

If accepting client’s instructions would lead to a conflict of interest with another client you also could not act as you would be breaching CCS.

Question 7

Can you accept instructions on behalf of someone else?

Answer 7

No. Your instructions must come directly from your client OR you must have instructions in writing from you client that this person can act on their behalf.

If you have any reason to believe that the instructions do not represent the wishes of your client you cannot act.

Question 8

What if the client is a director of a company giving instructions on behalf of the company how can this be verified?

Answer 8

1) Need to identify the director and should carry out a search at Companies House to verify they are a director

2) You will need to see evidence that the director is authorised to instruct your firm on behalf of the company. E.g. Board minutes or resolution authorising the director to instruct the firm on the matter.

Question 9

What is an own interest conflict?

Answer 9

Any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict with your own interests in relation to that or a related matter.

A significant risk of a conflict is sufficient.

You cannot act if there is an own interest conflict.

Examples:
- A financial interest of your or someone close to you: eg a client asks you to carry out due diligence on a company you or your spouse/partner owns shares in

• A personal or business relationship of yours: eg asked to advise on a claim against a relative, friend or someone you are involved with financially or business
• Your role as an employee: eg a client asks for advice in relation to a dispute involving your employer or a fellow employee
• Your own conduct as a firm or individual: eg where the wrong advice has been given to a client or a wrong action taken on their behalf

Question 10

What are the two types of conflicts of interest?

Answer 10

1) Own interest conflict

2) Conflict of interest unless:
- substantially common interest; or
- competing for the same objective

The presence of a significant risk of a conflict is sufficient.

Question 11

What is a conflict of interest?

Answer 11

A situation where your separate duties to act in the best interests of two or more clients in the same or related matter conflict. (eg dispute between two clients)

Applies to:
- same or related matters
- separate duties to act in the best interests of two or more clients conflict.

Cannot act unless an exception applies

Question 12

What are the exceptions to conflict of interest?

Answer 12

Clients have:

• A substantially common interest

OR

• The clients are competing for the same objective

AND (in either case):

(i) all the clients have given informed consent, given or evidences in writing, to you acting;

(ii) where appropriate you put in place effective safeguards to protect your clients’ confidential information; and

(iii) you are satisfied it is reasonable for you to act for all the clients

Question 13

What is a substantially common interest?

Answer 13

A situation where there is a clear and common purpose between clients and a strong consensus on how it is to be achieved.

E.g.
- Two people are buying a house to live in together
- Two clients instruct you on setting up a business together

Note: as soon as negotiations are involved there is a risk each of the parties best interests will differ.

Question 14

What is meant by clients competing for the same objective?

Answer 14

Two or more clients are competing for an objective which if obtained by one client will make that objective unattainable to the other client or clients.

Objective: means an asset, contract or business opportunity which two or more clients are seeking to acquire or recover through a liquidation or by means of an auction or tender process or a bid of offer (but not a public takeover)

Question 15

Why are lawyers prohibited from acting where there is a conflict of interest?

Answer 15

Because you have a duty to act in the best interests of each client which you will not be able to do if clients have competing goals.

Question 16

When do you need to carry out a conflict check?

Answer 16

• Before you take on new instruction you will need to check whether the work you are proposing to do for the client conflicts with any work your firm is doing for another client or if it conflicts with your own interests.
• If you work for a national or international law firm this will involve checking whether the work conflicts with work your firm is doing for an existing client in another office in the country or overseas.
• Should carry out a conflict check when you take on a new instruction from both new and existing clients.

Question 17

What does a conflict check involve?

Answer 17

A search should be carried out against:
- The client name (and any of its parent or subsidiary companies);
- The client’s company number (and that of its parent or subsidiary companies)
- The names of any counter parties to the matter

May also extend to:
- company name and number of the company being bought
- names of directors of the client (including directors names of any parent company and subsidiaries) and of the company being bought
- name of the matter

Question 18

CCF 2.1: conflicts

Answer 18

Means law firms need to have systems in place to ensure that there are no conflicts in place at the outset of the instruction

Question 19

Do the SRA require firms to send client care letters?

Answer 19

No they do not.

However, the SRA does require certain information to be set out for the client in writing. Most firms choose to send client care letters to their clients as a good way of demonstrating that they have met the SRA’s requirements.

Question 20

Examples of good reasons to terminate the client’s retainer

Answer 20

• You cannot obtain clear instructions;
• to carry on acting would breach the code or break the law;
• your client has failed to pay their bills - must have specific contractural agreement in writing with a right to send the client interim bills and a right to terminate the retainer for non-payment

Question 21

CCS 8: information to clients

Answer 21

8.6: you must give clients information in a way they can understand. Ensure they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them.

8.10: You ensure that clients understand whether and how the services you provide are regulated. Includes:
(a) explaining which activities will be carried out by you, as an authorised person;
(b) explaining which services provided by you, your business or employer and any separate businesses are regulated by an approved regulator;
(c) ensuring that you do not represent any business or employer which is not authorised by the SRA including any separate business as being regulated by the SRA

8.11: Ensure that clients understand the regulatory protections available to them

Question 22

CCS 8: information on costs

Answer 22

CCS 8.7: ensure that clients receive the best possible information about how their matter will be priced and both at the time of engagement and when appropriate as their matter progresses, about the likely overall costs of the matter and any costs incurred.

CCS 8.8: Ensure that any publicity in relation to your practice is accurate and not misleading including that relating to you charges and the circumstances in which interest is payable by or to clients.

Question 23

What form does the complaints procedure need to be in?

Answer 23

You must inform your client IN WRITING of the complaints procedure at the time of engagement.

Question 24

CCS 8: complaints procedure

Answer 24

8.2: ensure that as appropriate in the circumstances you either establish and maintain or participate in a procedure for handling complaints in relation to the legal services you provide.

8.3: you ensure that clients are informed in writing at the time of engagement about:
(a) their right to complain to you about your services and your charges
(b) how a complaint can be made and to whom
(c) any right they have to make a complaint to the Legal Ombudsman and when they can make any such complaint

—> law firms will commonly include their complaints procedure in the client care letter

CCS8.5: you ensure that complaints are dealt with properly, fairly and free of charge

Question 25

CCS 8.4: right to complain to ombudsman

Answer 25

Must ensure that when clients have made a complaint to you, if this has not been resolved to the client’s satisfaction within 8 weeks following the making of a complaint, they are informed in writing:

(a) of any right they have to complain to the Legal Ombudsman, the time frame for doing so and full details of how to contact the Legal Ombudsman; and

(b) if a complaint has been brought and your complaints procedure has been exhausted:
(i) that you cannot settle the complain;
(ii) of the name and website address of an alternative dispute resolution (ADR) approved body which would be competent to deal with the complaint; and
(iii) whether you agree to use the scheme operated by that body

Question 26

When should a firm send a client care letter?

Answer 26

At the beginning of a matter.

Note: there is an ongoing obligation to keep your client informed about all aspects of their matter as it progresses, including duty to inform the client if any information in the client care letter becomes superseded.

Question 27

Do you need to send a client care letter to established clients?

Answer 27

Typically a firm will send an annual client care letter to established clients and shorter letters once they receive instructions on each new matter.

Question 28

What is included in a client care letter?

Answer 28

1) Confirmation of your client’s instructions and options
- identification of your client’s objectives
- an explanation of the issues/options available to them;
- agreement on the next steps; and
- agreement on an appropriate level of service/agree how you will keep the client informed of progress

2) General information on each party’s responsibilities
- explanation of your responsibilities
- explanation of the client’s responsibilities
- explanation of anything which may limit the steps you can take on their behalf
- advice to your client that you may be entitled to a lien in respect of their files if there are any unpaid costs

3) Costs information
- how you will charge the client
- hourly rates for every individual
- intervals at which you will notify the client of fees on the clock
- VAT, disbursements and any additional fees
- any agreed limits on the fees
- any fee estimate provided by the firm
- circumstances in which the fee estimate could be exceeded and provision for the firm to notify the client if it anticipates exceeding the fee estimate; and
- payment terms

4) Explanation of who will be dealing with the matter
- information about the name and status of the person dealing with the matter and who is supervising them

5) Complaints procedure
- explanation of how the client can complain if they are unhappy with the service
- to whom they should complain
- details of the firm’s complaints procedure