Special Feature: Council for Licensed Conveyancers’ Stephen Ward discusses the Risk Agenda
Stephen Ward, Director of Strategy and External Relations has written an article in which he discusses the Risk Agenda and what it means to the Council for Licensed Conveyancers’ (CLC’s) members.
We are fortunate enough to be part of a profession that constantly demonstrates very high levels of regulatory compliance, and should, rightly, be proud of the effort that goes into ensuring that the public has full trust in licensed conveyancers. As we all know, good reputations are hard won and easily lost.
At the Council for Licensed Conveyancers (CLC) we believe in being available to, and working constructively with, our regulated community, rather than only communicating when something has gone wrong. This approach ensures firms are able to do the best job they can – and that is good for clients, for the practices themselves and is good and effective regulation.
Naturally, nothing is perfect, and we spent many months last year analysing the compliance issues that firms in this sector need to be aware of and have frameworks in place to deal with. The compliance issues we identified came from conversations with practices as well as our monitoring and inspection work. As such, our inaugural Risk Agenda was born and launched into the community in February. Its purpose is to highlight issues that affect every practice – such as anti-money laundering – to those that become problematic for a relative few, like storing files after closure. We also provide advice on issues that have been highlighted by the pandemic over the last year, such as, undertaking due diligence checks when lawyers cannot meet the client in person and view physical identity documents.
While designed to aid our own regulated community, the compliance topics it examines are applicable to many, and provide a helpful reminder of how to best approach these issues.
The Risk Agenda looks at seven different areas: Professional Indemnity Insurance (PII), Anti-money laundering (AML), business continuity planning, file storage, transparency, aged balances and conflicts of interest. Below we go into detail on a few of the areas which have the widest impact:
Professional Indemnity Insurance
An industry wide issue over the last few years, many conveyancing practices found insurers refused them cover because of the type of work they were conducting.
The biggest red-flags to insurers have been buyer-funded developments, new-build developments and ‘dabbling’ in private client work. Buyer-funded developments, also known as fractional developments, involve the use of individual deposits of as much as 80% to fund the purchase and build of the development, instead of the developer sourcing commercial finance. They are unlike traditional deposits put down on new-build developments, where the conventional 10% is held in an escrow account.
However, there have been multiple examples of the developers failing and the deposit money being lost – in some cases, the whole scheme was essentially a scam. Conveyancers are often used to provide a veneer of respectability and can find themselves on the receiving end of claims in the event of a development’s failure.
Likewise, traditional new-build development work is an ongoing concern for insurers. A recent report by broker Lockton says that there have been a number of large losses experienced through repetition of a single error across multiple units within a development. Another issue that causes insurers anxiety is conveyancers that handle a small amount of trust and probate work.
We have been engaging with both brokers and insurers to discuss how to improve the current situation by including a more comprehensive proposal form so as to reduce the need for follow-up questions, and a service level for responding to proposals. Ultimately, we are looking to ensure that firms receive a timely response, giving them time to reapply or to take the necessary steps to wind up their businesses in an orderly manner allowing client risk to be well managed.
Everyone in this sector will be aware of the high priority that has been placed on anti-money laundering, and for the most part, most businesses have displayed considerable diligence in ensuring they adhere to the rules. However, our inspections have discovered different interpretations of what firms have do to ensure they are complying with their duty to check the source of a client’s funds and wealth.
We would expect firms to investigate and satisfy themselves that the clients’ reported income and wealth aligns with what documentation and information the practice has. For example, does their job role match with wealth? Information should be verified with evidence, rather than simply taking clients assertions. The Covid-19 pandemic has raised questions about undertaking due diligence checks when you cannot meet the client in person and view physical identify documents. Our position has been that obligations remain constant, notwithstanding Covid-19, and firms are not required to conduct extended due diligence simply because they have not met clients face to face. But every possible step should be taken to ensure that the person on the other end of the telephone or Zoom call is who they say they are.
Transparency and informed choice
Transparency has been a buzz word in the sector ever since the Competition and Markets Authority (CMA) first review in 2016 found that the sector wasn’t working well for consumers. A follow up review last year acknowledged there had been progress, but there is still more work to be done.
Our advice remains that price, quality and service information needs to be in a prominent place and be accessible – a link in a website’s footer to ‘regulatory information’ is neither of these things. It should be available with one click from the homepage. Broad example pricing, such as “Our fees range from £300 to £2,500” or “Our costs start from £700”, is not transparent and also does not explain the basis on which the fee is calculated or whether it includes disbursements.
Quote generators are popular, but firms should not require users to put in personal information before receiving a quote. They should be clear that it is optional. An alternative is to show examples of quotes as well so that users have a strong idea of what their quote will be.
Written by Stephen Ward, Director of Strategy & External Relations
Stephen leads on the CLC’s strategy development and delivery.
Stephen has a background in the civil service and political campaigning as well as business strategy in the private sector. For several years Stephen was Director of Communications and Corporate Social Responsibility at the Law Society.
Kindly shared by Council for Licensed Conveyancers (CLC)
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