Changes to CLC handook

5 January, 2015

Overview

In December 2014, the CLC made 3 Exemption Direction applications to the Legal Services Board, related to a range of technical and minor drafting alterations to the CLC Handbook and associated documents:

1. CLC Anti-Money Laundering and Combating Terrorist Financing Code additions – safeguards duplicated from Mortgage Fraud Code
2. Changes to timeframes of First Tier Tribunal (and other) – impacts upon the determination and appeal timeframes of a number of arrangements, as set out by the LSB
3. CLC Handbook Introduction – removal of a time-specific provision.

Having presented the case for the changes against the LSB’s Significance, Impact and Risk framework, the LSB approved the CLC’s Exemption Direction requests for these alterations, on 15^thDecember 2014.

The amendments will be formatted in the relevant documents on the CLC website for 12 weeks. As the amendments do not place any new and/or significant regulatory responsibilities upon the regulated community they will go live with immediate effect.

Exemption Direction Request 1: CLC Anti-Money Laundering and Combating Terrorist Financing Code additions

Provisions new to the AML and CTF Code are formatted in yellow. The majority of provisions have been transferred verbatim. Where amendment (i.e. deletion) has been made to the version of text provided in the Mortgage Fraud Code – so that the provision is universal, rather than specific to conveyancing work – this is highlighted by a strikethrough.

1. The following provisions previously found only in the CLC’s Acting for Lenders and Mortgage Fraud Code (Specific Regulatory Arrangement)  will now also be provided in the CLC’s Anti-Money Laundering and Combating Terrorist Financing Code , as identified in the text box below.

Anti-Money Laundering and Combating Terrorist Finance Code

7. You ensure that management arrangements, systems and controls enable the identification, assessment, monitoring and management of AML/CTF risk are appropriate to the nature, scale and complexity of your activities. Any system or product you use must be sufficiently robust to provide the necessary degree of certainty and incorporate qualitative checks that assess the strength of information supplied. It will include data from a range of sources and across time. Your evidence base and level of verification must be composite and comprehensive.

[items 8 -10 remain as they are]

11. You:

11.1 establish the Client’s identity, obtaining proof of that identity to establish that a Client is who he says he is and that he lives at the address given;

Advise the lender if, in any case, a client is unable, reluctant or unwilling to provide this verification;

Identify all the other owners of the property and other persons who might an interest in or rights over the property (if any) and ensure that the client’s current co-owner/partner is, where applicable, the co-owner/partner referred to on the title of the property;

11.2 obtain confirmation of instructions direct from the Client (and from all other interested parties) wherever possible, particularly where he or they communicate through an intermediary and

1. obtain detailed instructions;
2. satisfy itself that the Client is not subject to duress or undue influence and
3. satisfy itself that the Client is entering into the transaction knowingly;

11.3 be satisfied that the Client’s economic position, wealth and lifestyle correspond with the proposed transaction mortgage that he is proposing to enter into and there are no facts which suggest the potential for mortgage fraud (e.g. that he has not overstated his income in the mortgage application or that he does not have substantial arrears on an existing mortgage account); and 

11.4 check all signatures to reduce any risk of forgery of the signatures of other interested parties (e.g. a husband who forges his wife’s signature).

[What was item 11, becomes item 12,

12. Records are stored on a Durable Medium].

Significance/Impact/Risk Assessment

1. Significance: the amendments provide clarity, transparency and accountability to all regulated individuals and firms, not just those providing conveyancing (i.e. those to whom the Lenders/ Mortgage Fraud Code applies).
2. Impact: given that these requirements are already placed upon the regulatory community, the impact should be negligible. The provisions will remain in the Acting for Lenders and Mortgage Fraud Code also as they remain relevant there, particularly where they refer to conveyancing-specific risks, and given that we try to render each Code a one-stop shop for the reader i.e. providing all the responsibilities in that subject area without undue need to cross-refer to another Code.
3. Risk: presuming we are afforded the right to issue standalone licences, there is more potential for regulated firms/individuals to be regulated by the CLC Handbook’s Universal Regulatory Arrangements only. For instance, a firm providing probate services only would not need to refer to the Lenders/Mortgage Fraud Code, as it is specific to conveyancing; they would though, as any CLC entity, be bound by the broad AML Code’s provisions.  Including the risk mitigation provisions in the universally applied AML Code ensures that all CLC entities are required to take account of these general financial probity risks, regardless of the specific legal service provided.
4. We are also duplicating some of the Mortgage Fraud Code’s Guidance provisions in the AML and CTF Guidance: please see the Guidance  for the additions.

Exemption Direction Request 2: First-Tier Tribunal (& other) Timeframes

1. Amendments needed to be made to the following arrangements:
2. Regulation and Enforcement Policy  – item 5.7
3. Licensed Body (ABS) Licensing Framework– items 11.8, 15.5, 16.3-16.5
4. Adjudication Panel Rules – item 14.3

as a result of the FTT/LSA timeframe provisions set out in the LSB document, Technical changes to rules made under s96 of and Schedule 13 to the Legal Services Act’ and subsequent email/document received from LSB regarding our own licensing timeframes.

Assessment

2. Assessment of Significance, Impact and Risk of amendments:

Amendments to regulatory arrangements

All proposed additions/amendments formatted in yellow; deletions struck through

1. Regulation and Enforcement Policy
   5.7 Review/appeal of decisions – the respondent may ask for any decision to be reviewed by the Adjudication Panel.  The respondent will also be entitled to appeal.  Depending on the nature of the decision made, and who makes it, the appeal may be heard by the High Court, the First Tier Tribunal or the Upper Chamber (see Table at 3.3.1). In the case of informal, regulatory or disciplinary action taken by CLC staff the matter will be referred to their line manager or another Director (with no prior involvement in the matter) who will review the decision. All requests for appeals to the High Court must be made within 28 days of the determination. All requests for appeals to the FTT must be made within 28 days of the determination, unless otherwise directed by the FTT.
2. Licensed Body (ABS) Licensing Framework
   11.8        Any proposed Non-Authorised Person with a material interest (of 10% or more) of a CLC Licensed Body will be given temporary pre-approval of their notifiable interest for an initial period of 90 days (which on notice to them and the body the CLC may extend by up to a further 90 days) during which time the status of the body’s licence will become temporary. The approval will become permanent only when the CLC has judged them fit to own. The 90 day determination of whether to approve, place conditions (or further conditions) on, or object to, an interest gives us sufficient time to analyse the information provided and to properly consider all relevant issues to determine what the appropriate approach should be.   Failure to respond promptly to requests for information may result in a delay in determining the application, or in exceptional circumstances in the application being refused.

   First-Tier Tribunal

   15.5        Having been notified of the determination made by the Adjudication Panel, the applicant may appeal to the First-Tier Tribunal (FTT). The FTT provides a general right of appeal wherever an individual or ABS does not accept the CLC’s decision. It will hear appeals only from those who have exhausted their resolution options within the CLC, or where the CLC Adjudication Panel has not met its published timescales. Unless otherwise directed by the FTT, the appeal request must be made within 28 days after the determination was sent to the applicant, or within 14 days after expiry of the time for the Adjudication Panel to determine an appeal. We may extend the 28 day period (up to a maximum of 120 days) upon the Licensed Body’s request.

16.3        In a Limited Liability Partnership of two Members, if one of them:

1. is committed to prison in civil or criminal proceedings; or
2. is unable, because of incapacity caused by illness, accident or age, to attend to the body for a period of more than 14 days (or such other period as the CLC may determine); or
3. Lacks capacity (within the meaning of the Mental Capacity Act 2005) and powers under sections 15-20, or section 48, of that Act have been exercised in relation to him; or
4. abandons the body; or
5. has a licence issued by the CLC subject to a condition which would be breached by continuing as a LLP Member; or
6. is not a Licensed Conveyancer; or
7. dies,

   the Licence will continue in full force and effect provided the remaining LLP Member is an Authorised Person, and within 28 days of the occurrence an additional person has become an LLP Member. We may extend the 28 day period (up to a maximum of 120 days) upon the Licensed Body’s request.

16.4        Where the Head of Legal Practice or the Head of Finance and Administration:

1. is committed to prison in civil or criminal proceedings;
2. is unable, because of incapacity caused by illness, accident or age, to attend to the body for a period of more than 14 days (or such other period as the CLC may determine);
3. Lacks capacity (within the meaning of the Mental Capacity Act 2005) and powers under sections 15-20, or section 48, of that Act have been exercised in relation to him;
4. leaves the Licensed Body;
5. has a licence issued by an Approved Regulator  subject to a condition which would be breached by continuing as a Head of Legal Practice or Head of Finance and Administration; or
6. dies;
    

   the licence will only continue in full force and effect provided an appropriately qualified and suitable replacement is in place within 28 days of the occurrence.   We may extend the 28 day period (up to a maximum of 120 days) upon the Licensed Body’s request.

 
16.5        Where there is a change in ownership in a Body the effect of which is that:

1. a Non-Authorised Person acquires a Material Interest in a Body (or there is a change of 10% or more in the Material Interest a Non-Authorised Person has in a Body); and/or
2. a Body ceases to exist and another entity (which may be a Body) succeeds to the whole or substantially the whole of that Body’s business

the CLC may determine that:

1. the licence of the Body continues in effect (with or without such Authorisations, Permissions and/or Conditions as the CLC may determine);
2. the licence of the Body is transferred to the entity which has succeeded to the whole or substantially the whole of that Body’s business (or to another person approved by the CLC) and that licence has effect with or without such Authorisations, Permissions and/or Conditions as the CLC may determine; or
3. a temporary licence is issued to the Body or to the entity which has succeeded to the whole or substantially the whole of that Body’s business (or to another person approved by the CLC) for a period of up to 28 90days (or such further period as the CLC may determine up to a maximum period of 120 days) and that the temporary licence has effect with or without such Authorisations, Permissions and/or Conditions as the CLC may determine.

3. Adjudication Panel Rules – amendment formatted in yellow

14.3 Unless otherwise directed by the FTT, a Respondent may within 28 days after the determination has been made appeal to the First Tier Tribunal.

Exemption Direction Request 3: CLC Handbook Introduction

1. The following paragraph has been removed from the CLC Handbook Introduction

The Regulations for the Appointment and Service of Council Members 2011, the Discipline and Appeals Committee Rules 2009, the Discipline and Appeals Committee (Procedure) Rules 2011, the Adjudication Panel (No 2) Rules 2011, the Approved Regulator (Disciplinary Procedure) Rules 2011, the Licensing Authority (Disciplinary Procedure) Rules 2011 and the CLC Fees Framework 2011 continue in full force and effect, unaffected by the coming into force of the CLC Handbook and its accompanying Frameworks.

Significance/Impact/Risk Assessment

2. Significance: the paragraph is time-specific and was provided to cover transitional arrangements and clarity during the transfer from the Rules to the Handbook.
3. Impact: given that the arrangements referred to are time-specific and are no longer in force, the impact is negligible.

4. Risk: their removal should help mitigate any reputational risk from having arrangements in the Handbook which are no longer relevant.