Regulatory and accreditation compliance
Although regulators and other organisations have allowed a certain amount of flexibility during the lockdown, as the property market starts to move forward regulatory and compliance expectations will start to return to their pre-lockdown levels. Therefore, you need to ensure you are fully compliant with the SRA Standards & Regulations and CQS Scheme.
Due to many firms furloughing staff and operating remotely during the lockdown, there will be a number of areas to address. For example, furloughed staff may not now have the competence to handle property matters in line with CQS and lender requirements, and therefore require training; firms that have been operating remotely will need to update any policies and procedures that were changed to reflect operations during the lockdown so they reflect the return to “normal” operations.
CQS Core practice management standards
Compliance plan – it is key that your plan reflects how your firm deals with compliance matters, so it should reflect any ongoing changes introduced as a consequence of the Covid-19 lockdown and its after-effects.
Risk Register – your risk register should be a living and breathing document and updated when the risks faced by your firm change. With the lockdown many new risks would have become apparent or risk levels of already identified risks changed, for example, cashflow risk is likely to have increased due to the reduction in fee income. As your firm moves forward risks will change, so your risk register will need to be updated accordingly.
Staff communication – it is imperative that whatever changes you make to your compliance arrangements you communicate them to your staff.
Anti-money laundering – the risk of money laundering has increased due to Covid-19 so you should have updated your relevant policies and procedures to reflect this; this risk is unlikely to reduce while the economy remains in such a fragile state. Ensure your firm-wide risk assessment is appropriately updated as the SRA is asking to see these as part of its ongoing AML thematic review.
Mortgage fraud – following the 2008 property crash many cases of mortgage fraud were identified and it is likely to be the same with the Covid-19 crisis; you need to ensure that you take all appropriate steps to stop your firm from becoming involved.
Business continuity plan – the Covid-19 crisis will have exposed many deficiencies in firms’ continuity plans and therefore lessons need to be learnt from these. Based on recent government announcements, it is possible there will be further lockdowns, so you need to ensure that your plan is updated and staff are informed of the changes made and how they may impact on them should it need to be invoked again.
Financial transactions – it is important that as your operations change you review and update your procedures that relate to the transfer of funds, the management of funds received by your firm, and the authorisation of payments/transfers.
Cashflow and budgets – the lockdown will have exposed many firms to financial difficulties, and therefore effective financial planning and management is critical; you need to ensure you review and update your financial plans, including cashflows, budgets, income and expenditure accounts.
Supervision – with many staff still working remotely it is essential that you have appropriate supervision procedures in place, and these will need to be reviewed and updated as you adapt your operations to changing circumstances.
Training – as a CQS firm you must ensure that staff undertake appropriate mandatory training; it is also a requirement under the SRA Standards & Regulations that all staff are competent to fulfil their roles. Where staff are returning from furlough and have not undertaken any training during this period, you will need to assess whether any training is required to take account of changes to the way in which property transactions are now to be processed.
File reviews – with many firms operating remotely and using hardcopy client files, it will have been difficult to review files in line with standing file review policies and procedures; such reviews are a critical part of your firm’s supervision and management responsibilities. Therefore if your system has “slipped” during the lockdown you will need to make sure it is fully reinstated on return to “normal” operations.
Risk assessments – file opening, ongoing and closing risk assessments, looking at things like conflicts, money laundering, mortgage fraud, are a very important part of managing client risks and need to be undertaken in all circumstances, as a failure to undertake them could expose your firm to considerable risk.
Client communication – although it is difficult to operate normally under a lockdown it is important to ensure you communicate regularly with your clients so they understand what is going on with their transactions.
Complaints – the Legal Ombudsman has said that it cannot change its scheme rules during the current crisis, but will take account of delays caused by it as long as there is evidence to show that clients have been kept fully informed about matters.
Matter progression – the current lockdown will have made matter progression difficult in many cases, but this is why communicating with clients and keeping comprehensive file notes is important; regulators have said that if it isn’t written down it didn’t happen.
Client assets – with many firms operating remotely client files and assets are likely to have found their way to fee earners’ homes to be worked on, so it will be essential that when operations return to normal all of these are accounted for.
Closed files – it is likely that some client matters will have concluded during the lockdown, so these must be closed in line with your file closing procedures and any client balances returned promptly.
Client information – it is likely that with all the upheaval caused by the lockdown client information will have been exposed to additional levels of risk, for example, by fee earners taking files home or handling client data on unprotected home computers; it is important that you and your firm assess and mitigate these risks, even if this is after the event.
Cybercrime – it has been recognised that cybercrime has increased as a consequence of Covid-19, and therefore you need to take appropriate steps to ensure client information is protected going forward. You should assess whether client information has been put at risk and, if it has, take steps to mitigate this. For example, if personal IT equipment has been used by fee earners working remotely you should see whether the equipment/data has been compromised.
Suspension of CQS
It has become apparent that some CQS firms are contemplating giving up their CQS accreditation until the property market fully recovers in order to save costs. However, this could be a very risky strategy, so if this is something you are considering you should think very hard before making a final decision, for example, you could find it difficult to get back on to lender panels when re-accredited.
The Access Group is now the only authorised CQS training provider, aside from the Law Society, servicing over 1,000 firms with CQS training. Together with our Risk and Compliance platform that assists firms in evidencing that they are complying with the CQS Core Practice Management Standards (CPMS) and Protocols, we can provide a complete solution for firms looking to maintain or gain their CQS accreditation.