June Regulatory Update

James Price

Hello and welcome to this month's regulatory update. In this session, we'll be covering three key developments: upcoming AML and sanctions data collection, directions issued by the Legal Services Board to the SRA, and the current consultation on complaint handling requirements.

James Price

So let's start by looking at the AML and sanctions data collection that's coming up in July. The Solicitors Regulation Authority will be conducting a data collection exercise focused on anti-money laundering and sanctions compliance. This is part of their ongoing efforts to assess how law firms are responding to their regulatory obligations in these critical areas.Now, it's important to note—responding to this questionnaire is a regulatory requirement. When the submission window opens, compliance officers at each firm will be contacted directly. So, make sure you're checking for that communication and preparing in advance.

James Price

The questionnaire will cover a number of areas, including whether your firm is carrying out work regulated under the Money Laundering Regulations, and how many suspicious activity reports your firm has submitted.You'll also be asked about your approach to compliance—whether your firm has a documented risk assessment in place, and when your team last received AML training. There will also be questions related to client account activity. For example, the SRA will want to know about the amounts held in client accounts, and the volume of transfers to and from those accounts.Finally, you'll need to declare whether your firm has any clients subject to sanctions, and if so, how you're complying with your obligations under sanctions regulations. Datalaw will be covering this topic in more detail during our upcoming Spring Update, so do keep an eye out for that session if you'd like further guidance.

James Price

Now, moving on to our second topic - the Legal Services Board's response to what happened with Axiom Ince. The LSB has now formally instructed the SRA to act on a range of regulatory failings identified during and after that collapse. The SRA has been given 12 months to implement these changes, with progress reports due to the LSB every three months.So what does the LSB expect? There are several key actions. Firstly, the SRA must improve governance and oversight, including the introduction of a direct reporting line to a Risk and Audit Committee. Secondly, the SRA is required to strengthen its risk functions—particularly around the sale, merger, and acquisition of firms. They're also being asked to reassess authorisation processes to ensure the risks of having a single individual holding key positions across multiple firms are properly managed.

James Price

There's also a clear focus on client money protections. The LSB has directed the SRA to ensure that firms have systems in place to safeguard client funds and that adequate financial reviews are taking place. Additional measures include new oversight procedures for firm transactions and improvements to the SRA's intervention protocols, ensuring more effective early action where concerns arise.It's also worth noting that the SRA is currently consulting on changes to the SRA Accounts Rules, particularly around client money. The outcomes of that consultation are expected later this summer, and the LSB has made it clear they'll be watching closely to ensure the SRA follows through with these improvements.We'll be addressing these changes in more detail in our upcoming webinars—specifically, in sessions titled New SRA Accounts Rules and Reporting Accountant Changes.

James Price

And finally, let's turn our attention to the SRA's consultation on complaint handlingWhile the proposed changes are relatively minor, they are important to be aware of. The updates apply to section 8 point 3 of the Code of Conduct for Solicitors, and by extension, 7 point 1 of the Code of Conduct for Firms. There's also a revision proposed to Rule 2 point 2 of the SRA Transparency Rules.Here's the proposed new wording for the Code of Conduct for Individuals:"You ensure that clients are informed in writing: at the time of engagement; on conclusion of their legal matter; upon request; and if a complaint is made during a matter—about their right to complain to you about your services and charges, how a complaint can be made and to whom, and any right they have to complain to the Legal Ombudsman, including when they may do so."

James Price

As for the SRA Transparency Rules, the suggested change requires that any published complaints information must be clear, accessible, and placed in a prominent location on your firm's website. Firms should begin reviewing how and when they communicate complaints information to clients, and consider whether updates will be required to their website and written client communications.

James Price

That wraps up our June 2025 regulatory update. We'll continue monitoring these developments and provide further guidance as more information is released. Thanks for tuning in—and don't forget to check our upcoming webinars for deeper dives into these evolving topics.