Accounts rules
All practice units, regardless of whether you will be handling clients’ money or not, must set up the required books, records and cashroom procedures in order to comply with the accounts rules before you start your practice. The rules cover client monies and interest, regular accounting and reconciliations, staff training and supervision, and the delivery of compliance certificates.
Our guidance gives an overview of the rules.
There are options to outsource your cashroom activities, depending on the type of business you plan to operate. When selecting an outsourced provider, consideration should be given to the insurance cover provided. Third-party fraud by outsourced staff would not be covered by the Client Protection Fund. You should also ask your suppliers about their GDPR compliance, cybersecurity credentials and contingency planning regime in the event of a breach.
As part of our regulatory duties, we carry out financial compliance inspections with all law firms on an ongoing basis. To make sure that your new practice is on the right track, we will carry out an inspection with you within the first nine months. Please contact us if you want to know more about inspections and how best to prepare.
Our CPD team hosts regular seminars and roadshows on this topic and also covers manual book-keeping to ensure that you remain fully updated on what is expected in advance of your first Law Society inspection.
See rule and guidance B6.
We recommend that you meet with a member of our financial compliance team to discuss the accounts rules requirements, the books and records that need to be held and software available on the market.Contact [email protected].
Anti-money laundering (AML)
Law firms continue to be targeted by money launderers, so it is important to be aware of the threats. To ensure compliance, you should ensure that excellent controls, policies and procedures are in place from the outset.
Firstly, you will need to appoint someone to be the nominated officer for money laundering (money laundering reporting officer or MLRO).
Secondly, you will need to determine whether your business falls within the scope of money laundering regulations. More information is available on our website in the section, ‘Who needs to complete the AML registration?’ If your firm’s activities are subject to the regulations, you must complete the registration, which includes a requirement for basic disclosure certificates that are less than six months old.
Within six months of setting up (when you have a better understanding of your firm and your clients), we will send you a questionnaire prior to an initial inspection by our financial compliance team.
Even if your work is not subject to the regulations, you should still have policies and procedures in place to address the Proceeds of Crime Act and the reporting of suspicious activities.
Our CPD and events team organises regular roadshows and seminars on the topic of AML compliance and best practice. You can access up-to-date guidance from HM Treasury and the Law Society on our website.
Our guidance page includes a draft AML policy, client risk assessment form and firm-level risk assessment template.
See basic disclosure for information.
See Member Benefits for useful suppliers.
Data protection and GDPR
In common with all organisations that process personal data, law firms must comply with GDPR. You can find out about data protection and GDPR from the perspective of a legal practice on our website. Remember, all new firms must register with the Information Commissioner’s Office.
See the Law Society’s Guide to GDPR.
See the Information Commissioner’s Office for more details.
Incidental financial business
If you carry out any of the following, you will have to apply for an incidental financial business licence (issued by us) or you will need that area of work to be regulated by the Financial Conduct Authority (FCA). Incidental financial business means financial work carried out as part of your other professional services. If you carry out any mainstream financial work, you must be regulated by the FCA.
- Incidental consumer credit business – more commonly, debt administration or debt collecting
- Incidental insurance distribution business – advice on, or the sale of, general insurance products
- Incidental investment business – for example, arranging the sale of shares in an executry
- Incidental long-term care insurance business – advice on, or the sale of, long-term care insurance products
- Incidental mortgage business – the arrangement of a mortgage on the instructions of a client.
See rule and guidance C2.
A list of all our forms is available at the end of this guide.
Officers of the firm
You will need to assign certain roles within the firm, and confirm who holds those roles when you submit your application:
- Client relations manager
- Money laundering reporting officer
- Cashroom manager
- Compliance manager (if registering for civil legal aid)
- Insurance distribution officer (if required under the Insurance Distribution Directive).
Annual submissions
Regulation is an ongoing process. Every year you will be asked to provide information about your firm depending on
the work you carry out:
- Accounts certificate (twice per year)
- Anti-money laundering certificate
- Master Policy submission.
