Hello,
It has been a busy start to July. Everyone in a rush to get things off their desk before jetting off, perhaps?
The SRA has opened fresh consultations on complaints handling and third-party litigation funding, published substantial consumer research on high-volume claims, and reminded every regulated firm that the annual AML and sanctions data return is due later this month.
We also have four new JBL articles. They cover the proposed COLP and COFA restrictions, the supervision risks created by polished AI-assisted work, the money behind consumer litigation, and a more personal look at life inside our team. (Ahem, we’re hiring again, ahem).
Compliance Corner deals with a question that can unsettle even experienced lawyers: what should you do when an SRA investigation letter arrives?
Further down, there is a free webinar recording from last week, a sample Compliance Insight on AML red flags in estate administration, details of our Birmingham COFA Masterclass and the latest disciplinary outcomes….
Have a great weekend – Jon and the team.
Are the SRA’s COLP and COFA proposals aimed at the right problem?
The SRA’s proposed client money reforms go way beyond accountants’ reports. The more difficult proposal would restrict who can act as COLP or COFA in certain firms, based on who can determine or direct significant management decisions in practice.
Our webinar discussion raised an uncomfortable possibility: a rule intended to improve checks and balances could leave some firms appointing compliance officers with less authority, less access to information and less ability to challenge management. The article sets out the proposals and the governance questions firms should start asking now.
The supervision trap: maintaining SRA accountability with GenAI
AI-assisted work can arrive on a supervisor’s desk looking fluent, polished and complete. That appearance may conceal the most important questions: which tool was used, what information was entered, which sources were checked and what the junior actually understood.
This article explains why a final read-through is not enough. Firms need clear rules on approved tools, permitted uses, confidentiality, source verification and the level of supervision required. Juniors need a safe route to use the technology, not an expectation that they will design the controls themselves.
Thanks to Akrivium for this guest post.
The SRA turns its attention to the money behind litigation funding
The SRA has opened a consultation on third-party litigation funding in consumer claims. It is not proposing a ban. The focus is on transparency, independence, financial resilience, risk assessment and what happens to clients if a funded practice fails.
For firms using external funding, this is becoming a governance issue rather than a matter left to the finance team or one commercial partner. Our article explains the proposed requirements and what firms should be reviewing before the consultation closes.
A week in the life of a Senior Risk Specialist at JBL Compliance
What does compliance consultancy look like away from the policies and checklists? Ed Marshall gives a behind-the-scenes view of a varied week: helping firms respond to regulatory problems, reviewing evidence, talking through practical decisions and translating broad rules into steps that work in a real business.
Good compliance support is rarely about quoting a rule and walking away. Context, judgement and an understanding of how the firm operates are just as important.
We are looking for more people like Ed. Do you know someone who might be interested?
News and guidance
SRA consults on third-party litigation funding controls
The SRA’s new consultation proposes a specific package of controls for firms using third-party litigation funding in consumer claims. These include clearer client information, disclosure of professional duties and funding arrangements, prompt notification to the SRA, a documented funding risk assessment reviewed at least every six months, and an orderly closure plan for firms within scope.
The proposals reflect the regulator’s concern that funding can influence business models, risk appetite and the way clients are treated. Firms should map all funder relationships, reserved rights, financial covenants, portfolio dependencies and exit arrangements. The consultation closes on 17 September 2026.
Read and respond to the SRA consultation
Most consumers think client account interest should benefit the client
New research from the Legal Services Consumer Panel found that 52% of consumers thought interest earned on money held in a client account should be paid to the individual client. A further 22% favoured using it to fund free legal advice, while only 4% thought the provider should keep it.
The research arrives while the future treatment of client account interest remains under active policy discussion. Firms should expect continuing scrutiny of how their interest policy is explained, whether it is fair and how it is applied in practice.
SRA proposes tighter communication rules for complaints
The SRA has opened a supplementary consultation on first-tier complaints. It proposes that firms must give a client a resolution timeline when the complaint is first notified and provide regular progress updates while it is being considered. The existing eight-week deadline for a final response remains.
This is not a dramatic procedural change, but it would make silence during an investigation harder to justify. Firms should review complaint acknowledgement templates, update intervals and ownership arrangements now. The consultation closes on 1 September 2026.
Read and respond to the consultation
Consumer research exposes confusion in high-volume claims
SRA-commissioned research involving more than 15,000 adults found that high-volume claims remain an important route to redress, but many consumers do not understand what they are signing up to, what fees may be deducted or whether they could pursue a free route themselves.
The practical message for claims firms is familiar but increasingly urgent: online journeys, marketing, authority to act, costs information and alternatives to paid representation must be clear before the client is committed, not explained after the event.
Expect more SRA rules and guidance based on this research.
FATF warns about terrorist financing through social and streaming platforms
FATF has published a report on the use of social media, instant messaging and streaming services to raise and move funds for terrorism. The report highlights how fundraising narratives, digital payments and online communities can make activity appear informal or legitimate while obscuring the destination or purpose of funds.
Law firms are not expected to police the internet, but client explanations involving online fundraising, informal donation networks or rapidly moving digital funds should not be accepted at face value. Consider whether the source and purpose of funds are credible, record the reasoning and escalate concerns where appropriate.
Law Society updates its complaints handling practice note
The Law Society has refreshed its detailed practice note on handling complaints. It confirms that a complaint can be any expression of dissatisfaction, not only a formal letter headed “complaint”. Informal concerns should be recognised and addressed early before positions harden.
The practical guidance is to:
- make sure all staff know when they can resolve a problem and when it must be escalated;
- give one person ownership;
- acknowledge more complex complaints promptly;
- investigate with an open mind;
- keep a written record; and
- explain both the decision and the reasoning.
The note suggests aiming to acknowledge complaints within two working days, although the regulatory deadline for a final response remains eight weeks.
The complaints process should also produce useful management information. If the same issues recur, the answer is rarely better complaint drafting alone. It may point to supervision, capacity, communication, costs or process failures elsewhere in the business.
Read the updated practice note
Law Society explains the SRA’s investigatory powers
Another updated practice note summarises the SRA’s statutory powers to require documents, information and explanations from firms, managers, employees and interest holders. A formal notice may set a short deadline and can specify how material must be produced. Extensions can often be agreed where there is a genuine reason, but the request should never be allowed to drift.
The note also reinforces several points that are easy to overlook under pressure:
- preserve the original evidence;
- do not reconstruct or “tidy” files;
- take care over confidentiality and legal professional privilege; and
- check whether separate disciplinary defence cover is available, as the compulsory minimum terms for PII do not usually fund defence costs.
This guidance sits neatly alongside this edition’s Compliance Corner. Once an investigation letter arrives, early control of the process makes a significant difference.
A new ethical practice framework for private practice
The Law Society is working on a new framework to help solicitors in private practice identify and work through ethical issues. It is intended to support day-to-day decision-making and culture, rather than simply repeat the SRA Principles.
Firms may find it useful as a discussion and training resource. Ethical problems are often recognised too late, after commercial pressure, client demands or internal hierarchy have narrowed the available choices. A shared decision-making approach can help people raise concerns earlier and record how a difficult judgement was reached.
The 2026 Money Laundering Regulations amendments are now in force
Most of the Money Laundering and Terrorist Financing (Amendment) Regulations 2026 came into force on 30 June. These are targeted changes rather than a wholesale rewrite, but firms still need to update affected documents and processes rather than wait for the next annual review.
Among the practical points are revised sterling thresholds, a more targeted enhanced due diligence trigger for unusually large or complex transactions, changes to the treatment of high-risk jurisdictions and clearer expectations around pooled client accounts. Review your firm-wide risk assessment, AML policy, client and matter risk assessment prompts, training material and any pooled account procedures.
Law Society considers the future FCA AML supervision regime
The Law Society has published its view on the plan to make the FCA the single professional services AML supervisor. The change will require legislation and a substantial transition, so firms remain supervised under the current arrangements for now.
The Society supports consistent supervision but warns against losing sector-specific expertise, creating duplicate burdens or mishandling legal professional privilege. Firms do not need to redesign their systems yet. They do need to keep current controls working, retain good evidence and monitor how the future regime will interact with the SRA’s wider regulatory role.
You might also like…
The value of working with a specialist legal sector finance broker
Gemstone Legal explains why law firm funding is not the same as ordinary business finance, particularly where PII renewals, tax liabilities, work in progress and uneven cash flow all interact. Read more
Absent partners and unsupervised juniors annoy clients
RollOnFriday looks at client frustration when work is delegated without enough senior involvement or explanation. A useful prompt for firms reviewing supervision and client expectations. Read more
Junior lawyers divided over whether AI is eating their jobs or cutting the boring bits
Legal Cheek reports mixed views among junior lawyers about whether AI is improving work or threatening development. The supervision and training implications are as important as the technology itself. Read more
Could lawyers be sued for failing to use AI?
Legal Cheek picks up a provocative point from the UK Jurisdiction Taskforce: professional standards may eventually examine not only careless use of AI, but whether a reasonable professional should have used an available tool. The immediate answer remains competence and judgement, not technology for its own sake. Read more
What to do this month
Deadline: submit the SRA AML and sanctions data return by 27 July 2026
Every regulated firm contacted must respond, even if it carries out no work within the scope of the Money Laundering Regulations. A nil return is available where appropriate. The questionnaire covers MLR-regulated work, sanctions exposure and suspicious activity reports. Check now that the right person has access through mySRA and leave time to gather the figures.
Compliance corner
We have received an SRA investigation letter. What now?
A letter from the SRA can make even experienced solicitors anxious. That is understandable. There is usually a deadline and the regulator may ask for files, documents, explanations, chronologies, ledgers, policies or access to systems.
The first point is worth remembering: SRA contact does not automatically mean wrongdoing. It may be a thematic review, an AML desk-based review, a complaint-led investigation, a request following a self-report or a more serious forensic investigation. The first job is to work out what kind of contact the firm has received and what the SRA is actually asking.
The worst responses tend to fall into two camps: panic or drift. Panic produces rushed explanations, defensive emails and sometimes ill-advised attempts to improve the file after the event. Drift is just as risky: nobody takes ownership, the deadline approaches and the COLP or COFA only becomes involved when the response is already half-written.
The better approach is calm urgency. Put someone senior in charge. Break the letter into individual requests. Diarise the deadline. Preserve the original evidence. Decide who needs to be involved and whether the firm needs specialist advice or insurer notification. If more time is genuinely required, ask early and explain why.
Before replying, carry out a proportionate internal review. Establish what happened, what the contemporaneous records show, whether policies were followed, whether anyone suffered harm, whether the issue is isolated or wider, and what has already been fixed. The response should then be factual, structured and supported by documents. Answer the questions asked, label the evidence clearly and avoid speculation or emotional language.
The full Compliance Corner below includes a practical response structure, common mistakes and points arising from the Law Society’s new note on the SRA’s investigatory powers.
Read the related webinar write-up
Read the full Compliance Corner
This is not legal advice. If you have a question you would like us to answer in this section, feel free to send it to info@jblcompliance.com
Free CPD
Recording: SRA Accounts Rules and COLP and COFA reforms
Our recent webinar examined the SRA’s proposed changes to accountants’ reports and the restrictions on who may act as COLP and COFA. The discussion moved beyond the draft wording to the practical questions firms are now asking about power, influence, succession planning and the risk of distancing compliance officers from real decision-making.
The recording is available free for 30 days. It will be particularly useful for managing partners, COLPs, COFAs, finance directors and risk teams considering whether their current governance arrangements may be affected.
New JBL Compliance training resources
Confidentiality course for law firm teams
Confidentiality problems rarely announce themselves as major incidents. They arise in everyday conversations, email chains, shared documents, remote working, identity checks, conflicts and requests from family members or third parties.
Our on-demand course gives law firm staff a practical grounding in the duty of confidentiality, disclosure, legal professional privilege, consent, permitted and required disclosures, common risk areas and what to do when information has been shared incorrectly. It includes scenarios and short knowledge checks, making it suitable for induction or refresher training across the firm.
The course is included for users of the JBL Compliance training platform or as a standalone licence.
Free Compliance Insight: AML red flags in estate administration
Estate administration can involve long-running relationships, multiple beneficiaries, asset sales, overseas connections and changes to the people giving instructions. This short Compliance Insight highlights AML red flags that can emerge after the file has been opened, not only during initial onboarding.
The video is a free sample of the JBL Compliance learning portal. Subscribers receive access to full courses as well as shorter Insights addressing specific practice points that can be shared with the relevant team when the issue arises.
COFA Masterclass
A practical day for people responsible for client money
We are now taking bookings for our next in-person COFA Masterclass on Wednesday 7 October 2026 in Birmingham. The full-day course will be delivered by Sean Hankin and Liz Bond, two former SRA specialists with extensive experience of the Accounts Rules and the way firms’ financial controls are examined in practice.
The course is aimed at COFAs, finance directors, legal cashiers, managing partners and anyone with responsibility for client account governance. It will cover the role of the COFA, reconciliations, breaches, residual balances, banking facilities, accountants’ reports, supervision of the finance function and how to deal with problems before they become regulatory events.
The fee is £495 plus VAT.
To reserve a place, email sam@jblcompliance.com.
”This was a really practical and useful course on the role, expectations and responsibilities of a COFA which, if I am honest, I expected to struggle through but it was the most useful course, on the subject, I have ever been on. A must for any COFA.
Previous Masterclass delegate
Disciplinary watch
Repeated failure to cooperate
John Mark Abbott was rebuked after failing to cooperate with both the Legal Ombudsman and the SRA. The outcome records repeated failures to provide information or substantive explanations over a period of months. He was also ordered to pay £600 costs.
The lesson is straightforward. Even where the underlying client complaint appears manageable, ignoring the Ombudsman or regulator creates a separate conduct problem and removes opportunities to resolve the issue at a lower level.
No documented firm-wide or matter risk assessments
Ash Clifford Limited agreed a £19,052 fine following an SRA AML desk-based review. The firm did not have a documented firm-wide risk assessment for a prolonged period and could not provide client and matter risk assessments for any of the six files sampled. The firm has since remedied the position.
This is another reminder that an AML system must be evidenced at both levels. A policy cannot compensate for missing matter assessments, and file-level checks cannot replace a current firm-wide analysis of the practice’s own risks.
Fabricated balances and client account failures
Jonathon Howard Bostock, a non-lawyer manager who held senior finance and compliance roles at PM Law Group, was disqualified from acting as a manager, employee, HOLP or HOFA of a licensed body without SRA permission.
The findings included causing or allowing improper client account withdrawals and shortages, failing to report serious financial difficulty, providing false or misleading information and fabricating client and office account balances.
£25,000 AML fine
Pothecary Witham Weld Solicitors was fined £25,000 after an SRA review identified missing matter risk assessments and a long period without compliant AML policies, controls and procedures. The SRA noted the firm’s cooperation, admission and remediation, but the duration and seriousness of the failures still led to the maximum fine available in the circumstances.
No evidence of actual money laundering is needed before weak systems attract a penalty. The regulatory question is whether the firm has put the required controls in place and can show that they operate consistently.
Historic AML gaps remain relevant
MTG Solicitors agreed a £21,033 fine for failings in its firm-wide risk assessment and AML policies and procedures over an extended period. The firm had remedied the issues by the time of the outcome.
The case reinforces a point that features repeatedly in SRA enforcement: historic gaps do not disappear when a document is eventually updated. Firms should retain review records and be able to show when changes were made, why they were made and how they were implemented.
What we do
- Outsourced COLP and COFA support
- Learning management system for multiple users
- Bespoke training – remote and in person
- Compliance audits
- New firm and ABS applications
- Independent AML audits
- AML and sanctions support
- SRA Accounts Rules and client money reviews
- File reviews
- SRA reports and notifications
- Escrow accounts for law firms
Contact us if you need help with any of the issues in this newsletter.
2026 Money Laundering Regulations amendments: what law firms need to do
The 2026 amendments to the Money Laundering Regulations are targeted rather than transformational, but that does not mean law firms can ignore them.
The changes affect enhanced due diligence, high-risk jurisdictions, pooled client accounts, trust registration, off-the-shelf companies and crypto-related risk. However, for most firms, this is not a rip it up and start again moment. (Try getting that out of your head).
SRA authorisations: why the hard work starts before the forms
SRA authorisation projects are often treated as form-filling exercises, which is a mistake.
Whether you are setting up a new firm, applying for ABS status, changing ownership, appointing new compliance officers or restructuring an existing practice, the real work starts before anyone logs into mySRA. You need to identify the regulatory triggers, map the people and entities involved, work out who needs approval, spot AML and BOOM issues, and explain the application in a way that gives the SRA confidence.
This article looks at what firms need to do before the forms, why authorisation projects get delayed, and how to put together a stronger application from the outset.
Compliance Spotlight: An interview with Julian Wintle, COLP of Redkite
In the latest Compliance Spotlight interview, Jonathon Bray speaks to Julian Wintle about what it really takes to build a scalable compliance function across a growing regional firm with 19 offices.
The conversation covers cyber risk, data retention, file reviews, AI adoption, leadership buy-in, complaints data and why compliance teams need to prove that controls are working in practice.
”If you want a genuine culture of compliance, it must be driven unreservedly from the top down. But if you're struggling for board buy-in, speak the language of business metrics: show them exactly how robust risk management impacts the bottom line.
Legal Ombudsman fee increases: they fail, we pay
The Legal Ombudsman’s governing board is proposing a new case fee model that could see firms charged even where complaints are ultimately dismissed.
You heard that right. Under the proposals, all complaints accepted by LeO would attract a fee unless a waiver applies, with charges rising as the complaint progresses. Add in the time already spent investigating, responding, reviewing files and dealing with unhappy clients, and complaints become expensive long before any compensation or fee reduction is on the table.
This article looks at what the proposals mean for firms, why better first-tier complaint handling is only part of the answer, and why the OLC and SRA need to get much tougher with weak, tactical and AI-assisted complaints.
