Guidance

This non-mandatory Guidance accompanies many of the Handbook Codes.

Regulatory Arrangements Guidance - Universal

Overview

This Guidance is here to provide useful information to the regulated community and provide example policies or procedures

Accounts Guidance

AGED BALANCES GUIDANCE

Purpose of this Guidance

This guidance aims to help the regulated community resolve the problem of Aged Balances.

Note that the self-certification scheme means that firms do not need CLC authorisation to withdraw aged balances not exceeding £50.

Part 1 provides guidance on avoiding or minimising the occurrence of Aged Balances, and

Part 2 sets out the procedure which the CLC will follow, and the information you need to provide, when it considers whether to give written authority for the withdrawal of an aged balance of £50 or more.

Part 1: Avoiding Aged Balances

  1. On Receipt of Instructions
    1. Obtain the Client’s bank account details (name and address of bank, sort code, account number and name).
  2. Completion Statements
    1. The CLC Practice should keep accurate and up to date completion statements:
      1. a completion statement is an itemised statement of money paid in and out of the Client Account, concluding with a balance either owed by or to be paid to the Rightful Recipient
      2. draft completion statements should be prepared and checked prior to exchange of contracts
      3. all completion statements (in draft or final form) should be checked for accuracy by reference to:
        1. the transaction file, and
        2. the Client ledger.
  3. Client Ledgers
    1. The Client ledger should be checked to ascertain whether a balance remains after the last payment is made and, if so, the balance should be accounted for immediately to the Rightful Recipient.
    2. It is good practice to ensure that:
      1. the Client ledger balances are reviewed monthly to identify unexpected or dormant Client balances
      2. if a balance is held against a contingent liability, a note is made on the Client ledger (or alternatively the file) clearly identifying that liability, and
      3. a schedule of Client balances held for 3 months or more is maintained stating in each case the client(s) name(s), file/ledger number, the Rightful Recipient, the balance outstanding, the date of last movement and the reason for the balance.
    3. Before a file is closed or archived:
      1. the Client ledger should be checked to ensure:
        1. no balance is outstanding, and
        2. all cheque payments have been cleared by the bank
      2. a copy of the Client ledger showing a nil balance on both the Client and Office Accounts should be placed on the file.
  4. Unpresented Cheques
    1. Unpresented cheques appearing on the bank reconciliation should be reviewed monthly and where appropriate action taken to encourage Clients (in particular) to pay them in at a bank.
    2. If a cheque has been lost or remains unpresented after 6 months:
      1. a stop should be placed on the original cheque
      2. the cheque should be written back to the Client ledger, and
      3. the monies should be paid either:
        1. direct to the Rightful Recipient’s bank account, or
        2. at the Rightful Recipient’s direction.
  5. Retention Monies
    1. Where possible the CLC Practice should seek agreement providing for retention monies to be held on terms that provide for payment to a named person at a specified Bank account if the terms for their release have not been satisfied within a specified period.
    2. If no such term has been agreed:
      1. the file should be reviewed regularly (but no less than once every 3 months) , and
      2. you should seek to obtain such an agreement.
    3. It is good practice to maintain and review regularly (but no less than once every 3 months) a schedule of retention balances stating in each case the Client(s) name(s), the file/ledger number, the amount of and the reason for the retention and the last date for release.

Part 2 – Withdrawal of Aged Balances

  1. Aged Balances not exceeding £50
    1. The CLC does not need to authorise the withdrawal of an Aged Balance not exceeding £50 provided that the conditions in paragraph 4.4 of the Accounts Code are met.
    2. For all withdrawals ensure the relevant entries have been made to a suitable office nominal ledger account e.g. Write-Offs and, if appropriate, account for any tax e.g. VAT.
  2. Aged Balances exceeding £50
    1. The withdrawal of an Aged Balance exceeding £50 from the Client Account must be authorised by the CLC and paid to the CLC (paragraph 4.7 of the Accounts Code).
    2. An application for authorisation must be signed and dated and must include:
      1. A schedule setting out the:
        1. Client(s) name(s)
        2. file/ledger reference
        3. address of the property concerned
        4. name of the Rightful Recipient(s)
        5. balance outstanding, and
        6. date of last movement on Client Account
      2. A copy of the Client ledger
      3. A description of how the balance came about, and
      4. A statement confirming that reasonable steps have been taken to locate the Rightful Recipient, describing what the reasonable steps were and that they were unsuccessful.

    What are reasonable steps?

    1. What amounts to reasonable steps will depend on the particular circumstances and the sum involved. Examples are:
      • attempting to contact the Rightful Recipient at all known addresses, by all known telephone numbers and at any known e-mail address
      • attempting to return funds using available bank account details of the Rightful Recipient
      • contacting known contacts of the Rightful Recipient
      • advertising in a local newspaper
      • making a search of Companies House,  the Probate Registry and/or HM Land Registry
      • making use of social media
      • internet search.
    2. Where the Rightful Recipient cannot be identified, the CLC will, in exceptional circumstances, give authority for the withdrawal of funds from Client Account on the basis that a funds transfer for any sum so authorised must be drawn on the Client Account payable to the CLC.  On receipt, the funds will be placed to the credit of the CLC’s Compensation Fund. You should place a copy of the authority issued by the CLC on the Client’s file.
    3. If the Rightful Recipient makes contact after funds have been paid into the CLC’s Compensation Fund the CLC Practice should contact the CLC with a view to the Rightful Recipient making a claim for reimbursement on the Compensation Fund unless the body is no longer trading in which case they should contact the CLC directly.To be used in conjunction with Accounts Code.

THIRD PARTY MANAGED ACCOUNTS GUIDANCE

Third Party Managed Accounts Guidance

  1. A CLC Practice which has had CLC approval may use a Third Party Managed Account (TPMA) managed by a named TPMA provider as an alternative to a Client Account.

Your responsibilities before entering into arrangements with a TPMA provider

  1. As defined in the Glossary of Legal Terms, TPMA means an account
    1. held at a bank or building society in the name of a third party which is
        1. an authorised payment institution, or
        2. a small payment institution that has adopted voluntary safeguarding arrangements to the same level as an authorised payment institution, or
        3. an EEA authorised payment institution.
      (as each is defined in the Payment Services Regulations) regulated by the Financial Conduct Authority,
    2. in which monies are owned beneficially by the third party, and
    3. which is operated upon terms agreed between the third party, the CLC Practice and the Client as an escrow payment service.
  2. As a matter of good practice, the CLC Practice should undertake an assessment of the viability of the business of the TPMA and satisfy itself that there is minimum risk to Client Money and that the Client will be protected in the event that the TPMA closes.
 

The CLC must approve the use of the TPMA provider

  1. An application under paragraph 7.1 of the Accounts Code should be sent to the CLC at monitoring@clc-uk.org with:
    1. the Practice name and licence number
    2. the name of the TPMA provider and its FCA authorisation number, and
    3. the date on which it intends to start using the TPMA.

The CLC may request further information under paragraph 7.2 of the Accounts Code.

  1. Once approval is granted the CLC Practice does not need further approval where the same TPMA provider is used for another matter or Client. Further approval is required to use another TPMA provider.
  2. The CLC Practice should inform the CLC in writing within 14 days after ceasing to use a TPMA provider.

Status of money held in a TPMA

  1. Money held in a TPMA is not Client Money as it is not held or received by a CLC Practice and is not subject to the Accounts Code.
  2. Using a TPMA does not release the CLC Practice from the requirement to act in the best interests of its Clients, which includes protecting Client Money and assets (Overriding Principle 3, Code of Conduct). The CLC Practice should ensure that the decision to use a TPMA, and the TPMA provider used, is appropriate in the circumstances of each case and does not result in a greater risk to a Client’s money. This will include satisfying itself that the TPMA provider has appropriate insurance in place, the terms and conditions of which are not materially prejudicial to Clients.

Client protection and information arrangements

  1. In order to demonstrate compliance with paragraph 7.4 of the Accounts Code, before entering an arrangement with a TPMA provider, a CLC practice should take reasonable steps to ensure that the Client understands:
    1. the terms and contractual arrangements relating to the use of the TPMA
    2. their right to terminate the agreement
    3. their right to dispute payment requests made by the CLC Practice
    4. who will be responsible for costs associated with the arrangement
    5. that the TPMA is regulated by the FCA and complaints about the TPMA provider should be made to that provider in accordance with their complaints process, and
    6. that the regulatory protections applying to TPMAs are different to those applying to Client Money held in a Client Account.
  2. The CLC Practice should obtain regular statements from the TPMA provider and ensure that these accurately reflect all transactions on the account.
  3. Paragraphs 5.9 and 1.4 of the Accounts Code which require the CLC Practice to retain Accounting Records for no less than six (6) years and provide information requested to the CLC will also be deemed to apply to statements received from the TPMA provider.

Anti-Money Laundering Guidance

To view the printable PDF version, please click here. Introduction

Overriding Principle 2 of the CLC Code of Conduct requires you to maintain high standards of work. The approach set out below aims to help you comply with that principle. You are not obliged to adopt this approach, but it offers you an example of the minimum commitment that the CLC considers is likely to be needed for compliance.

Should you use the provided example as your starting point, it is likely that you would need to make amendments to ensure that it matches your particular circumstances. The procedures you adopt should apply a risk-based approach, taking into account the nature of your work, clients, and the number of employees. Contents:
  1. AML/CTF Example Policy
  2. AML/CTF Example Procedure
  3. AML/CTF Nominated Officer Example Policy
  4. Training Record Example
  5. Internal Reporting Form and Record of Decision Example
  6. Wording to be incorporated into the Terms of Engagement Example
  7. For Information - External Reporting
--------------------------   1. AML/CTF Example Policy IMPORTANT It is essential that the business and its employees comply with the letter and spirit of this policy since failure to do so may amount to a criminal offence for which it is possible to be sentenced to a term of imprisonment.
  1. As a business, we are committed to complying with the anti-money laundering legislation, in particular the Proceeds of Crime Act 2002, the Terrorism Act 2000 (each as amended) and the Money Laundering Regulations 2017(as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019).
  2. We must at all times take steps to ensure that our business is not used to launder the proceeds of crime or to assist terrorist financing.
  3. We must explain to clients the need to obtain proof of identity and the limitations on our duty of confidentiality to them either in our terms of engagement or otherwise in writing.
  4. We accept that the Nominated Officer has full autonomy in carrying out their duties.
  5. We will ensure that you are given appropriate and regular training to help you comply with AML/CTF, this policy and the procedures of the business.
  6. We will communicate to you details of any types of business we have decided not to accept.
  7. We will regularly monitor and review our policies, procedures and training.
  8. We require all of the business’s members to follow carefully the procedures set out in the Procedures Manual.
---------------------------   2. AML/CTF Example Procedure IMPORTANT It is essential that the business and its employees comply with the letter and spirit of these procedures since failure to do so may amount to a criminal offence for which it is possible to be sentenced to a term of imprisonment. Procedures
  1. You must not act or continue to act for a client until all requirements for Customer Due Diligence (CDD) or Enhanced Customer Due Diligence (EDD) have been met.If these cannot be met, you must:
    1. not establish a new business relationship; or
    2. terminate any existing business relationship.
    You must then consider whether to make an internal report to the Nominated Officer.
  2. The purpose of CDD and EDD is to help you decide whether your clients are the persons they say they are and that you can:
    1. know with some certainty whether your clients are acting on behalf of another (called a beneficial owner)
    2. establish there is nothing to prevent you providing the service requested
    3. assess whether the purpose of the instruction is consistent with the lifestyle and economic means of your clients
    4. establish there are no obvious elements which suggest that any transaction is unusual or overly complex in the context of those instructions.
  3. Whenever instructed by any client you must obtain evidence as early as possible that
    1. the client is the person he or she claims to be, for example, by a current signed passport or current UK photo driving licence or by using an electronic ID system; and
    2. a person of that name lives at the address given, for example, by a utility bill less than 3 months old or mortgage statement;
  4. Further examples of acceptable ID evidence are set out in the Acting for Lenders and Mortgage Fraud Code and Guidance. Photocopies should always be certified as being true copies of the original and signed and dated by the person making the copies.
  5. You should find out whether there is a beneficial owner in which case you must be satisfied who that person is. A beneficial owner is the person who ultimately owns and controls the client on whose behalf a transaction is being conducted.  There may be more than one. If the client is a Company you must identify who owns 25% or more of the structure and who exercises effective management and control. If your client is a non-natural person you must take reasonable measures to understand the person’s ownership and control structure.
  6. If you discover any discrepancy between the information you collect about a non-natural client and information collected from a relevant register, you must report the discrepancy to Companies House as soon as is reasonably possible.
  7. EDD checks must be made in any situation which by its nature can present a higher risk of money laundering or terrorist financing. Under the Money Laundering Regulations 2017, EDD is no longer mandatory if you do not see your client although should be considered as one of the risk factors.
  8. You must apply EDD when any of the following apply: the transaction is complex; the transaction is unusually large; there is an unusual pattern of transactions or the transaction or transactions have no apparent economic or legal purpose.
  9. You must apply EDD and ongoing monitoring when the client or counterparty is established in a high risk third country.
  10. Politically Exposed Persons (PEPs), which include local PEPs, are deemed to be higher risk. The approval by senior management is required for establishing or continuing the business relationship with a PEP, a family member or a known close associate of a PEP.
  11. In addition to the usual steps taken to verify identity for CDD, you should obtain at least one additional document of identity or verify identity electronically through [state specific source the business uses].
Checking identity by electronic means
  1. You must obtain "satisfactory evidence of identity", which must be reasonably capable of establishing (and does in fact establish to the satisfaction of the person who obtains it) that the potential client is the person they claim to be. Electronic evidence obtained should provide you with a strong level of certainty that any individual is the person they claim to be and that a person of that name lives at the address given using the client‘s full name, address and date of birth as its basis.
  2. You must satisfy yourself that any system or product used must be sufficiently robust to provide the appropriate level of assurance customers are who they say they are and that it is secure from fraud and misuse. Data accessed from a single source (e.g. the Electoral Roll) will not normally be sufficient on its own. Some databases will offer a higher degree of confidence than others.
  3. Before using a commercial agency for electronic verification, you must be satisfied that:
    1. the information supplied by the data provider is considered to be sufficiently extensive, reliable and accurate; and
    2. the agency has processes which allow its users to capture and store the information that they have used to verify an identity.
    The process should be cumulative and you may consider it appropriate to seek additional evidence (e.g. a copy of a document bearing a signature and a date of birth) in all cases or, at least, where any client poses a higher risk of identity fraud, money laundering or terrorist financing, or where the result of any electronic verification check gives rise to concern or uncertainty over the client’s identity.
  4. You may wish to consider whether the provider meets each of the following criteria, namely that it:-
    1. is recognised to store personal data through registration with the Information Commissioner’s Office;
    2. uses a range of positive information sources that can be called upon to link an applicant to both current and previous circumstances;
    3. accesses negative information sources such as databases relating to identity fraud and deceased persons;
    4. accesses a wide range of alert data sources; and
    5. has transparent processes that enable you to know what checks were carried out, what the results of these checks were and what they mean in terms of how much certainty they give as to the identity of the subject of the identity enquiry.
  5. Data from more robust sources where inclusion is based on proof of identity (such as government departments) ought to be included (under paragraph 12(b)). Negative information checks (under paragraph 12 (c)) minimise the risk of impersonation fraud.
  6. It is also important for:-
    1. The process of electronic verification to meet a standard level of confirmation before it can be relied on. In circumstances which do not give rise to concern or uncertainty, the standard level would be expected to be:
      1. one match on an individual’s full name and current address and
      2. a second match on an individual’s full name and either their current address or their date of birth.
      If the result of a standard verification check gives rise to concern or uncertainty over the client's identity, the number of matches required to provide reasonable satisfaction as to their identity should increase.
    2. You should ensure you understand the basis of the system you use in order to be satisfied that the sources of the underlying data reflect the CLC’s requirements and cumulatively meet the standard level of confirmation set out above as commercial agencies use various methods of displaying results (e.g. by the number of documents checked or through scoring mechanisms, etc).
Good Practice – Due Diligence
      1. Ongoing management/review of relationships with third parties
      2. Open source internet searches against other firms and its staff, including adverse information published by any relevant regulatory bodies and credit-checking
      3. Scrutinising, clarifying and verifying the information received from parties connected to the transaction, considering risks presented by new mortgage products
      4. Systems and processes for checking the identity of foreign Clients
      5. Checking that deposit/other monies or assets appear to be from a legitimate source
      6. Considering whether property valuations appear to be reasonable
      7. If your Client changes while you are acting on a transaction, contact both the old and the new Client so you understand the reason for the change of Client and are satisfied that it appears to be for a legitimate reason
      8. Electronic identification check with each Client as soon as instruction is received;  use a service provider accessing a unique system which matches identity of Client using ID and verifying confidential information known only to Client and provider.
    1. You keep a record and take copies of all relevant documentation about the client’s identity and address and we must keep them for at least 5 years.
    2. You make reasonable enquires and take copies of all relevant documentation relating to the source of funds and we must keep them for at least 5 years.
    3. If you are not satisfied with the documentation or explanation you are given you should consider whether to make further enquires (either orally or in writing), where appropriate, seeking guidance from a supervisor or someone with more experience within the business.
    4. Examples of Warning Signs which you should take into account in deciding whether to make an internal suspicion report are set out in the Acting for Lenders and Prevention & Detection of Mortgage Fraud Code and Guidance, paragraph 16, and include:   This list is not exhaustive and you will need to exercise your skill and judgment to assess any circumstances involved in a transaction which may seem to you or to an ordinary member of the public to be unusual or out of the ordinary.
    5. You should not accept cash payments in excess of [amount]1 made either to yourself or to any practice bank account. Deposits should not be paid in cash.
    6. If the nature of the transaction, the documentation or information you have been given would have aroused suspicions for a reasonable and honest Authorised Person(s)/Parties, then you must immediately make an internal suspicion report in writing using our prescribed form to [name] who is our Nominated Officer (or in his absence [name]). [The business should suggest a procedure to support its employees when dealing with customer enquiries once a report has been made.]
------------------------

1 CLC Practices should, with regard to their practice-wide risk assessment and risk profile, consider whether they will accept acsh payments. If they do, they should enforce a limit for the amount of any such payment which should apply individually and in aggregate to each client matter.

  1. Once you have made a report to the Nominated Officer, no further action should be taken regarding the transaction without the specific authority of the Nominated Officer.
  2. You must not disclose your suspicions or the fact that you have made a report to the Nominated Officer to any other person, in particular the person who is the subject of such a report, since this may amount to “tipping off”, which is also serious criminal offence for which you could be imprisoned.
  3. You must respond promptly to requests from the Nominated Officer for any further information.
  4. Further CDD/possible warning signs/good practice guidance can be found in the Acting for Lenders and Prevention & Detection of Mortgage Fraud Code and Guidance – see, in particular, paragraphs 16 & 17.
---------------------------   3. AML/CTF Example Policy for the body’s appointed Nominated Officer
  1. The business requires you as its Nominated Officer to comply with this policy in addition to complying with the business’s AML/CTF policy.
  2. Failure to carry out your duties may cause you to commit a criminal offence.
  3. You will have access to all files, records and information and be given sufficient resources and authority to fulfil the role and be allowed to carry out your duties without fetter, influence or interference.
  4. Upon receipt of each internal suspicion report from any of the business’s members, you must acknowledge receipt in writing to the person making the report. You must then consider carefully whether a report should be made to the National Crime Agency (NCA).
  5. You must make a report to NCA in the prescribed form where you have actual knowledge or suspicion, or where (based on what an ordinary member of the public might think) there are reasonable grounds to know or suspect a money laundering offence has been committed. You will need Consent from NCA for an ongoing transaction to proceed.
  6. If you do make a report to NCA then you must ensure that you maintain regular telephone contact with them where Consent is required.
  7. You must maintain a record of each decision you have made and keep it for at least 5 years whether or not you send a report to NCA.
  8. You must support and advise members of staff who make internal suspicion reports to you, emphasising the implications for them of “tipping off”. In particular you must do this where you are waiting for Consent to proceed from NCA.
---------------------------   4. Example of AML/CTF Training Record
The signature of the attendee acknowledges that training has been received to satisfy the current requirements of the body’s AML/CTF policy.
---------------------------   5. Example of Internal Reporting Form and Record of Decision Neither this form nor any copy is to be kept on the client file   6. Example of wording to be incorporated into the Terms of Engagement
6.1. Proof of Identity We must by law obtain satisfactory evidence of your identity and address. Please help us to do so by giving us the information and documentation we ask for. We are unable to proceed with your transaction and will not be able to exchange contracts until this has been provided. 6.2. Confidentiality As lawyers, we are under a general professional and legal obligation to keep your affairs private. However, we are required, by current legislation, to make a report to the National Crime Agency (NCA) where we know or suspect that a transaction involves Money Laundering or Terrorist Financing. By instructing us to act on your behalf in accordance with these terms of engagement you give us irrevocable authority to make a disclosure to NCA if we consider it appropriate. 6.3. You agree that this authority overrides any confidentiality or entitlement to legal professional privilege. We shall be unable to tell you if we have made a report.
-----------------------   7. External Reporting Form
7.1. A copy of the current Suspicious Activity Report (SAR) form may be accessed on the website for the National Crime Agency by following the links at  http://www.nationalcrimeagency.gov.uk/  and downloading the form. Alternatively, a SAR may be filed electronically by registering for and activating the On-line service on the “Reporting SARs” button. 7.2. For information or assistance with submitting SARs, SARs online queries, consent issues or general Financial Intelligence Unit matters telephone the UK Financial Intelligence Helpdesk on 020 7238 8282 and select the appropriate option. For general UKFUI matters email  ukfiusars@nca.x.gsi.gov.uk . Contact details:   http://www.nationalcrimeagency.gov.uk/contact-us/reporting-suspicious-activity-sar .

Complaints Guidance

For the printable PDF version, please click here.   Legal Ombudsman
  1. We have adopted the Legal Ombudsman’s definition of a complaint. Please see this Handbook’s Glossary.
  2. Contact information for Legal Ombudsman: Tel no: 0300 555 0333 Email: enquiries@legalombudsman.org.uk   Website:  www.officeforlegalcomplaints.org.uk

    Legal Ombudsman PO Box 6806 Wolverhampton WV1 9WJ

    1. The Legal Ombudsman can normally only investigate a complaint if it has already been through your own complaints procedures. If the ombudsman receives a complaint concerning you/the body which has not been through your complaints process, it will be referred to you to be dealt with in the first instance. It is therefore acceptable for you to include the following terms in any complaints procedure, “Unless it agrees there are good reasons not to do so, the Legal Ombudsman will expect you to allow us to consider and respond to your complaint in accordance with the procedure set out above, before they will consider it.”
    2. The Legal Ombudsman can accept complaints up to 6 years from the date of the act/omission or 3 years from when the complainant should have known about the issue. The complainant may also refer their complaint to the Legal Ombudsman if your own complaints process has taken 8 or more weeks to complete.
    3. The Legal Ombudsman’s jurisdiction covers service-related complaints; the ombudsman will refer any conduct-related complaints to the CLC.
    4. The Legal Ombudsman will charge a case fee (currently £400) if the complaint is upheld following a formal determination.
  Requirements of the Code
  1. Should your response timescales be shorter than those identified in the Code we would not require you to alter them.
  2. Provision must be made for complaints to be made by any ‘reasonable means’; determination as to what constitutes ‘reasonable’ is at your own discretion, taking into account the body’s size, profile and clients, though we would expect the minimum provision to be in person, telephone and by letter. NB. Bodies may wish to also provide Customer Feedback Forms and provide for complaints to be made via the body’s website.
  3. For the avoidance of doubt, item 4 of the Code (CoC P6e), requires that all stages of the complaints procedure are free; should the Legal Ombudsman not uphold a complaint escalated to it, the body cannot charge the client for any costs it incurs in investigating that complaint and its handling of it.
  Example Procedure Overriding Principle 6 of the CLC Code of Conduct requires you to promote equality of access and service. The Procedure template below aims to help you comply with that principle. You are not obliged to adopt this approach, but it offers you an example of the minimum that the CLC considers is likely to be needed for compliance.  Should you adopt the procedure, it is likely that you would need to make amendments to ensure it works with the number of your employees, the nature of your work and your Clients e.g. sole practitioners should only have complaint determination review arrangements in place with other bodies if the review would be carried out in a timely manner. NB. If you do not have a review system in place, the complainant should be referred directly to the Legal Ombudsman.  

ComplaintsExample Procedure 

If you have any complaint about the way in which your matter has been dealt with this is the procedure which will be followed:

  1. A complaint is an oral or written expression of dissatisfaction which alleges that the complainant has suffered (or may suffer) financial loss, distress, inconvenience, or detriment. We aim to resolve any complaint you have about the service we have given you as quickly as possible.  If you are unable to sort things out with the person who has been dealing with you please contact [name, contact details]. [Alternatively, for a sole practitioner – If you are unable to sort things out with me please let me know in writing and I shall ask [name, contact details] to look into your complaint for me]. 

Legal Ombudsman PO Box 6806 Wolverhampton WV1 9WJ

Unless it agrees there are good reasons not to do so, the Legal Ombudsman will expect you to allow us to consider and respond to your complaint in accordance with the procedure set out above in the first instance. You can refer your complaint up to 6 months after you have received our final written response to your complaint. You can also use the Ombudsman service if we have not resolved your complaint within 8 weeks of us receiving it. A complaint can be referred to the Legal Ombudsman up to six years from the date of the act or omission or up to 3 years after discovering a problem. The ombudsman deals with service-related complaints; any conduct-related complaints will be referred to the Council for Licensed Conveyancers.

  Good Practice This section provides you with guidance and examples of good practice, which you are not required to adopt but which you may wish to consider.
  1. Learning from complaints is an essential part of overall customer care. Complaints data provides you with a useful ‘business barometer’ to prevent recurrence of similar-themed complaints, identify any training needs and increase client satisfaction. To this end, you may wish to record complaints by themes or categories which are useful to your business.
  2. It is good practice to offer access to a review of how a complaint was handled. If you are the body’s only Manager you may wish to arrange for another firm to carry out a separate review of the complaint. Any review should be completed within 28 days of the request for the separate review and should not inconvenience the complainant.
  3. It is considered good practice for the senior management to review complaints trends. Lessons can then be learned and applied across the organisation, creating an environment in which complaints are seen as opportunities to improve systems and services. It is also considered good practice to periodically review the complaints-handling process to identify if there are any improvements needed.
  4.  Complaints enable staff to develop a better understanding of the service user’s point of view. All staff should be aware of the complaints procedure and take complaints seriously.  If complaints identify a systemic issue it may be appropriate to organise staff training to address it. Some organisations recognise and reward those members of staff who handle complaints well.
  5. It is beneficial for staff to feel that their complaints-handling procedures support them. It would be in their interests if the procedure meant that any accusations made against staff were known only to them and to those investigating the complaint. It is likely to be beneficial to the body if its staff – and if possible, its clients - are involved in developing complaints procedures.
  6. To enhance the accessibility of your complaints process you could give consideration to clients being able to lodge a complaint via your website; allowing someone else to make the complaint on behalf of a vulnerable client; and providing the complaints procedure in large print. This list is certainly not exhaustive; procedures should be tailored to the needs of clients wherever appropriate.
  7. Some organisations produce customer feedback leaflets which include an overview of the body’s complaints procedure and sometimes a complaint form or slip. Others survey complainants to gauge satisfaction with the complaint-handling process. Below are some possible questions which those considering customer satisfaction surveys may find useful.                        Possible ‘How well did we do?’ Survey Questions Some also profile the complainants to determine if there is a particular equalities group which feels disproportionately dissatisfied with the process.
  8. In addition to complaints, any compliment and comments you receive provide you with an opportunity to learn what is working well, as well as what isn’t. It may be appropriate to publicise these to staff so they know what customers want e.g. displaying thank-you letters, promoting service improvements made as a result of complaints.
To be used in conjunction with Complaints Code.

Conflicts of Interest Guidance

To view the printable PDF version, please click here.   Assessment of circumstances
  1. You should assess all relevant factors to determine if there is a conflict of interest between Clients. For instance, if there is an imbalance in bargaining power between the Clients, or a Client is vulnerable, or their interests are markedly different and cannot be reasonably reconciled.
  2. You should assess all relevant factors to determine if there is a conflict of interest between yourself and a client. For instance, if there is a financial interest or a personal or commercial relationship. Arm’s length transactions
  3. A body may act for two or more Clients in an arm’s length transaction for value where each Client is represented by a different Authorised Person(s)/Parties, except where a conflict of interest arises:
    1. A matter will not generally be regarded as an arm’s length transaction where the parties are related by blood, adoption or marriage or in a stable relationship (e.g. a cohabiting couple or the parties otherwise treat each other as family members).
    2. The determining factor is not the specific relationship but the existence of any inequality of influence or disproportionate bargaining power which may give rise to a conflict of interest between the Clients. Conveyancing transactions
  4. You must consider carefully whether a conflict of interest arises or is likely to arise when the body receives instructions to act for different Clients in the same matter where the seller is:-
    1. a developer or builder; or
    2. a lessor granting a lease
To be used in conjunction with Conflicts of Interest Code.

Dealing with Non-Authorised Persons Guidance

To view the printable PDF version, please click here.   The Effect of s.14-16 Legal Services Act 2007
  1. It is an offence for a person who is not an Authorised Person(s)/Parties and is not an Exempt Person to carry out Reserved Legal Activities.
  2. Where a Non-Authorised Person carries out reserved legal activities, the Non-Authorised Person's client is likely to be guilty of aiding and abetting the offence. The Authorised Person(s)/Parties acting for the other party may also be guilty of procuring the commission of an offence by inviting or urging the Non-Authorised Person to provide a draft contract or transfer or to progress the transaction.
  3. An undertaking offered by a Non-Authorised Person should not generally be accepted as it is not enforceable in the same way as an undertaking given by you or by another Authorised Person(s)/Parties.
Checks
  1. You should first check with the CLC, the Law Society or other Approved Regulator whether a person is an Authorised Person(s)/Parties entitled to provide reserved instrument activities, as required by paragraphs A3.2 and B3.2 of the CML Handbook, or is otherwise an Exempt Person (schedule 3 2007 Act).
  2. If unable to obtain that confirmation you should write immediately:-
    1. to the Non-Authorised Person:-
      1. asking for an explanation why the prohibition under s.14-16 2007 Act does not apply to them; and
      2. stating that in the absence of such explanation you cannot enter into any dealings with him unless there is clear evidence that no offences will be committed. An example of clear evidence would be a letter from an Authorised Person(s)/Parties Person confirming that he will prepare the relevant documents;
    2. to your own client explaining why you can not deal with the Non-Authorised Person unless clear evidence is forthcoming.
Conveyancing - Acting for the Buyer
  1. You should consider the following and, if appropriate, amend the contract:-
    1. replies to the Property Information Questionnaire and all other preliminary enquiries and requisitions signed by the seller;
    2. the deposit must be paid to you as stakeholder. If the seller will not agree to this, it may be possible to agree to place the deposit in a deposit account in the joint names of you and the seller;
    3. either the seller must attend personally at completion, or an authority must be handed over on completion signed by the seller for the purchase money to be paid to his agent. The reason for this is that the protection provided by s. 69 Law of Property Act 1925 only applies when a document containing a receipt for purchase money is handed over by a Recognised Body or solicitor, or the seller himself;
    4. deeds and keys are given to the person entitled to receive them (the buyer). If an authority on behalf of the buyer is offered to you, it is for you to decide whether or not to accept it, bearing in mind that no authority, however expressed, can be irrevocable;
    5. The purchase money, including any deposit, is paid either to the seller or to the seller’s properly authorised agent.
Conveyancing - Acting for the Lender
  1. You are not obliged to undertake work which would normally be carried out by the borrower’s legal adviser (such as drafting and preparation of the instrument of transfer). However, it is essential to the lender client that good title is transferred to the borrower.
  2. Compliance with s. 69 Law of Property Act 1925 may mean that you require either that the borrower to attend personally on completion, or that a signed authority from the borrower in favour of his agent is received on completion.
  3. On completion, title documents should normally be handed over to the borrower.
To be used in conjunction with Dealing with Non-Authorised Persons Code.

Equality Guidance

To view the printable PDF version, please click here. This Guidance aims to help you deliver these Outcomes by providing you with an overview of the effect of the Equality Act. You should refer to the Act itself in determining what steps are appropriate and reasonable for you to take in meeting the Act’s requirements. Government Equalities Office - Equality Act 2010   Scope of the Equality Act 2010 
  1. The Equality Act 2010 received Royal assent on 8 April 2010. The Act not only amalgamates existing discrimination law but strengthens the law by:
    • protecting a broader range of characteristics, and
    • extending the duties regarding age, sexual orientation and religion or belief.
  Characteristics protected by the Act
  1. The Act protects the following characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation:
    Age A person belonging to a particular age group. This applies to both young and older people, though much of the Act’s emphasis is upon equality for older people.  
    Disability A person has a disability if they have a physical or mental impairment, and the impairment has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities. This can also apply to a person who has previously had a disability.  
    Gender reassignment A person is proposing to undergo, is undergoing or has undergone a process (or part of a process) for the purpose of reassigning the person’s sex by changing physiological or other attributes of sex. A transsexual person is a person who has the protected characteristic of gender reassignment.  
    Marriage and civil partnership A person who is married or is a civil partner. This does not include someone who is engaged or a divorcee or person whose civil partnership has been dissolved.  
    Pregnancy & Maternity   This includes any illness the woman may suffer as a result of the pregnancy. Covers the period from when the pregnancy begins to 26 weeks after she has given birth.
    Race Includes colour, nationality and ethnic or national origins.  
    Religion and Belief Any religion and includes a lack of religion. Belief means any religious or philosophical (not political) belief and includes a lack of belief.
    Sex A man or a woman.  
    Sexual orientation A person’s sexual orientation towards— (a) persons of the same sex, (b) persons of the opposite sex, or (c) persons of either sex.  
What does this all mean for me?
    1. 1 You must ensure that service delivery and if you are an employer, employment arrangements, provide equality of opportunity and experience for individuals or groups with the protected characteristics. 3.2 You must not discriminate, victimise or harass anyone on the basis of the protected characteristics. Terms in contracts, collective agreements or rules of undertakings are unenforceable/void if they result in unlawful discrimination or victimisation. In some circumstances, employers are explicitly liable for harassment by third parties in the workplace. 3.3 You are required to make reasonable adjustments to prevent a person with a disability being placed at a disadvantage from someone who does not have a disability. An adjustment can be a one-off, physical, action such as making premises more accessible, or it may be an adjustment which is made on numerous cases, such as visiting a client at home if they are unable to access your premises. 3.4 You are not permitted to ask job applicants questions related to health or disability prior to offering a position (unless the questions are made for prescribed relevant reasons). 3.5 You cannot discriminate against someone because they are perceived to have, or are associated with someone who has, a protected characteristic e.g. carers. NB. This is bolstered by the concept of ‘discrimination arising from disability’. 3.6 The enforceability of pay secrecy clauses is limited. 3.7 Tribunals are able to make recommendations that will affect all of an employer’s staff, not just the claimant. 3.8 The Act also repeals or replaces rules of family property law which discriminated between husbands and wives. What is meant by discrimination, harassment and victimisation?
  1. This table provides an overview of each term:
Reasonable adjustments 
    1. 1 You have a duty, wherever reasonable, to remove barriers which would place a disabled person at a substantial disadvantage due to:
      1. a provision/criterion/practice (PCP) e.g. making information available in an accessible format, such as large print;
      2. a physical feature e.g. making premises accessible; or
      3. the absence of an auxiliary aid or service e.g. providing special computer software for a disabled employee.
      5.2 The cost of a reasonable adjustment must be incurred by the business and cannot be passed onto a disabled client by way of a disbursement or additional charge. 5.3 The definition of what constitutes ‘reasonable’ is based upon a ‘substantial disadvantage’ or ‘unreasonably adverse experience’ threshold.
  Service Provision
  1. A provider of services to the public or a section of the public (for payment or not) must not discriminate, harass or victimise a person requiring the service.
  Employment Arrangements
    1. 1 Employers must not discriminate, harass or victimise any person in their employment arrangements, offers, terms and opportunities for promotion, transfer or training (or for any other benefit, facility or service). 7.2 As an employer you are responsible for the actions of your employees and as a manager you are responsible for the actions of agents.
   Partnerships
  1. A firm or proposed firm must not discriminate, harass or victimise any person in its partner arrangements, offers, terms and opportunities for promotion, transfer or training (or for any other benefit, facility or service). Limited Liability Partnership (LLP)
  2. An LLP or proposed LLP must not discriminate, harass or victimise any person in its partner arrangements, offers, terms and opportunities for promotion, transfer or training (or any other benefit, facility or service).
  Ancillary Duties 
    1. 1 You must not discriminate or harass where the discrimination or harassment arises out of, or is closely connected with, the end of a service or employment relationship. 10.2 You must not instruct, cause, induce or aid another party to contravene their responsibilities under the Act.
  Family Law
  1. The Equality Act abolishes the presumption of advancement, by which, for example, a husband is presumed to be making a gift to his wife if he transfers property to her, or purchases property in her name.
  Human Rights Act 1998
  1. You should also be mindful of the Human Rights Act which incorporated the European Convention on Human Rights into English Law. The basic human rights protected by this legislation include:
    • the right to liberty;
    • the right to a fair trial;
    • the right to respect for private and family life;
    • freedom of thought, conscience and religion, and freedom to express your beliefs;
    • freedom of expression;
    • freedom of assembly and association; and
    • the right not to be discriminated against in respect of these rights and freedoms.
  Enforcement
    1. 1 The CLC will investigate concerns relating to discrimination and disciplinary proceedings will be taken if it is satisfied that there is a case to answer. 13. 2 Where a court or tribunal decides that you have committed an unlawful act of discrimination that finding will be treated by the CLC as a breach of the Overriding Principle to Promote Equality of Access and Service.
  Equality – Example Policy Introduction Principle 6 of the CLC Code of Conduct requires you to promote equality of access and service. The Policy template aims to help you comply with that principle. Whilst you are not required to have a written policy, we expect you to act in a way which is consistent with the Example Policy.  Should you use the provided example as your starting point it is likely that you would need to amend this policy to ensure that it matches your particular circumstances. The policy you adopt should take into account the number of employees, the nature of your work and your Clients.   Equality & Diversity Policy [Example]
  1. Our commitment We are committed to:
  2. We will comply with Principle 6 of the CLC Code of Conduct which requires us to promote equality and diversity, and with the duties of the Equality Act 2010.
  3. We will neither enable nor tolerate any of the following:
  4. Clients
    4.1 We will ensure that no individual client, or a client group, is discriminated against in accessing our services and functions or in the quality of service provided. 4.2 Instructions will not be refused on the basis of unlawful discrimination. 4.3 Our complaints handling-process is responsive to Client’s individual needs (particularly those that are vulnerable or have disabilities).
  5. Employees
    5.1 We will ensure that all partners, employees and applicants have equal employment opportunities. Our recruitment, appointment, appointment terms and conditions, promotion, training and benefits opportunities will not be discriminatory.
  6. Policy Implementation & Evaluation
    6.1 A senior member of staff is responsible for the implementation of this policy and ensuring all employees are aware of their duties under it, providing training and information as appropriate. 6.2 This member of staff will monitor the extent of compliance with this policy across the organisation. Appropriate data will be collected to inform this review. 6.3 Allegations of discrimination will be investigated under our grievance procedures. We will take such allegations very seriously and where an employee or stakeholder is found not to have complied with the policy we will take disciplinary action against them. 6.4 We will provide training to ensure staff are aware of their responsibilities under this Policy. 6.5 This policy will be updated as legislative and regulatory requirements are revised, in light of lessons learned by the business and in view of any good practice identified.
 

Good Practice Introduction

  1. Equality is about providing everyone with the same level of fairness i.e. an equal chance to contribute and participate. Diversity is about understanding and treating people as individuals i.e. recognising difference.
  2. The recognition of diversity and promotion of equality should not be an additional consideration but an intrinsic element of any business as it can bring great benefits and economic advantages  - increasing your capacity to serve a diverse client base, offering clients a range of skills sets and attributes, and the opportunity to harness creativity and continuously improve   and enhance your reputation as both an employer and a service provider – but it is only when a body’s cultural ethos and structural factors recognise this that these benefits can truly be felt. The following section highlights some principles of good practice that you may wish to consider adopting in order to feel these benefits. Equality Policy
  3. It is important that the implementation and success of an organisation’s Equality & Diversity Policy is systematically monitored, reviewed and evaluated. The policy is only likely to be successful if it is accompanied by a diversity training plan and communications plan which embeds diversity within the organisation’s culture. This may include education provision to ensure senior partners/ managers are aware of the benefits of diversity and providing frontline staff with training to equip them for dealing with the different needs of a diverse range of clients.
  Flexible and part-time working
  1. Working parents and carers (and those who are applying to care for a child) have the statutory right to request flexible working. It is likely to benefit both staff and the needs of the business if flexible and part-time working patterns are available on request to all staff, not just those with child care responsibilities.
  2. Arrangements might include four-day weeks or nine-day fortnights, working from home, working hours other than 9 to 5, career breaks, sabbaticals, or longer periods of unpaid leave over the summer months,
  3. Provision of such arrangements can help you retain existing staff (who feel that the business allows them to achieve an appropriate work/life balance) as well as recruit new staff (who are drawn to you as an employer who provides such arrangements). It can also enable the business to better meet the needs of clients e.g. open for business at times other than Monday to Friday 09.00-17.00.
  4. Provision of such arrangements should be positively promoted. It is important that these working patterns are not equated with lesser commitment, meaning those choosing  to work flexibly are penalised for doing so i.e. adoption of flexible working patterns should not adversely impact upon an individual’s career progression – transparent work allocation and promotion procedures will aid this - and terms/targets/ workloads should be rearranged appropriately.
  Outreach/mentoring
  1. The combination of an outreach programme and provision of formal support networks and mentoring schemes (as opposed to informal mentoring which can cause, or reinforce, diversity-based segmentation and segregation) can help make entry into, and retention and progression within, the legal profession less challenging for those from ‘non-traditional’ backgrounds. Where such schemes are in place they should be evaluated to determine their effectiveness.
  Quality Internships
  1. If your firm offers internships, or is thinking of doing so, you should give consideration to adopting the Common Best Practice Code for Quality Internships as signed up to the Gateways to the Professions Collaborative Forum. The Code seeks to deliver internships which are transparent and open to all, irrespective of background.
  Accreditation Schemes
  1. Equality accreditation and organisational assessment schemes - such as those provided by Cornwall Diversity Toolkit, Stonewall Diversity Champions Programme , Job Centre Plus Two Ticks Disability Scheme , the Working Families Charity, Back to Work company   and the jobs recruitment website Where to Work -   can assist you in benchmarking your procedures against best practice as well as giving the business external endorsement of its diversity credentials.
  Diversity Profile
  1. All CLC-regulated firms are required to participate in the biennial diversity profiling of the regulated community. The firm must publish a summary of the firm’s profile, the details of which will be prescribed by the CLC at the time of profiling. The summary provides potential staff and clients with information on the representative nature of the business and will help you identify any under-representation at varying stages of recruitment and career progression, indicating areas where action may be needed to address under-representation.
  2. Equality Impact Assess every major activity or policy decision you plan to undertake, enabling you to ensure that in delivering the outcomes you intend does not have an unintended consequence on, or create an unnecessary barrier to, different groups. The local government website gives you an overview of Equality Impact Assessments, but you may wish to develop your own toolkit.
To be used in conjunction with Equality Code.

Estimates and Terms of Engagement Guidance

To view the printable PDF version, please click here.   Estimates 
  1. It is advisable to set out the likely fees to be incurred in an estimate rather than in a quotation since a quotation will be treated as a fixed price contract which cannot be varied notwithstanding any provision in the Terms of Engagement to the contrary.
  Terms of Engagement
  1. It is good practice for Terms of Engagement to include:
To be used in conjunction with Estimates of Terms of Engagement Code. See also the Mortgage Fraud Guidance.

Management and Supervision Arrangements Guidance

To view the printable PDF version, please click here.   Introduction
  1. The way in which arrangements ensure compliance with the Code of Conduct (and thereby, all regulatory arrangements) is a matter for the individual entity However, each entity must be able to show that arrangements are in place and are operating to a level which satisfies the CLC it is compliant.
  2. Proportionate arrangements are likely to be the most effective (e.g. arrangements which are unnecessarily convoluted, or are judged ineffective or untargeted, may mean they aren’t used). Factors in determining the appropriateness of the entity’s arrangements will include its size and structure; the number, experience and qualifications of staff; and the nature of work undertaken; and the mechanism for periodic review of their effectiveness.
  Business Arrangements – good practice examples 
  1. Supervision and quality assurance arrangements are in place across the organisation.  Examples of these include (but are not limited to): misconduct; regulatory responsibilities and failures; and risk management (see elsewhere in this Code). The arrangements are recorded, published, reviewed and communicated to staff. NB. See also the Accounts, Complaints, Conflicts of Interest, Transactions Files, and Undertakings Codes and Guidance.
  2. The recruitment, selection and employment arrangements are periodically reviewed to help ensure an unfit and improper person (who could compromise the interests of the public and clients) is not employed.
  3. Training arrangements, including Continuous Professional Development provisions, enable all employees to maintain a level of competence appropriate to their work and level of responsibility. Content of training is responsive to business objectives, regulatory responsibilities and skills gaps.  Consideration is given to which training format (e.g. training course attendance or delivery, work shadowing) is best suited to both the subject matter and the target audience.
  4. Published Compliance policies promote ethical practise, encourage the body and its staff to act in a way which is compatible with the regulatory requirements.
  5. Staff are aware how, and to which named individual, they can raise concerns of non-compliance or wrong doing. They are encouraged to raise concerns, feel able to do so, and they are confident these will be acted upon appropriately and they will not be victimised for raising them. 8.    An anti-bribery and corruption policy sets out what isn’t acceptable and makes clear whom staff should contact if they are suspicious of an activity, conduct or gift.
  6. Regular reviews of financial management reports at both department and firm level.
  7. A client care policy sets out what clients have the right to expect. It includes timeframes within which a response to a query or approach needs to be made. Training is given on the policy.
  8. Feedback, both proactively gathered and otherwise procured, informs the development of the business.
  9. A communications policy sets out how the entity ensures all communications, including emails, of a high standard.
  10. A firewall program, and/or other device helps to keep the network secure.
  Supervision arrangements Considerations
  1. Depending on the nature and structure of the entity, factors in determining whether work is being effectively supervised are likely to include the:-
    1. size of the business and the number of offices;
    2. number of Authorised Person(s)/Parties available to supervise each office/ ratio of Authorised Person(s)/Parties to non-Authorised Persons;
    3. volume and nature of the work undertaken (e.g. more intensive supervision given to those who provide substantive advice rather than routine or administrative work);
    4. number, competence, training and duties of unqualified staff;
    5. arrangements for an Authorised Person(s)/Parties to monitor incoming and outgoing communications; and
    6. different working practices of both teams and individuals.
  2. The Social Mobility Toolkit for the Professions provides case studies and good practice examples regarding mentoring, careers advice and internships.
  Supervision Good practice examples
  1. An organisational chart is published to staff. This clearly sets out the governance structure, identifies decision makers, their responsibilities, and reporting lines.
  2. Protocols/Guidance set out how formal supervision and appraisal sessions are scheduled, recorded and reviewed; and roles, responsibilities and training requirements are identified.
  3. Supervision sessions enable both supervisor and supervised to give feedback.  Supervised individuals are enabled to take some responsibility for their own development.  The entity may also operate a mentoring scheme.
  Risk Management Introduction
  1. Risks can take many forms and may be regulatory, strategic, operational or other. Categorisation of identified risks is likely to assume a form of the following:
    1. those which can be tolerated, or transferred;
    2. those which need to be treated; and
    3. those which must be terminated.
  2. Effective risk management is likely to require a risk register and action plan. Risk assessment processes often employ both a probability (or likelihood) and impact rating which looks at the likelihood of the risk occurring; and the arrangements currently in place, or those needed, to prevent or reduce this. A red, amber and yellow ranking (or other) may then be applied, which prioritises the termination of the highest (red) risks.
  Good Practice examples
  1. Risks to the achievement of regulatory responsibilities – in particular the delivery of the positive outcomes identified in the Code of Conduct - are systematically identified, centrally recorded, evaluated, monitored and managed. These arrangements are periodically reviewed to:
    1. verify that all risks to critical activities and supporting resources have been identified; and
    2. the arrangements continue to reflect the organisation’s objectives, are fit for purpose and appropriate to the types and levels of risk the organisation faces.
  2. A senior manager is responsible for the risk management arrangements. A quarterly risk assessment, which contains risk reports from all teams, is submitted to the senior management team. See also the risks guidance accompanying the Transaction Files Code.
  3. Staff receive training on the entity’s risk management arrangements. This includes information on risk types and how to identify, capture, assess and mitigate them.
  4. A senior person is designated as the data protection lead. The entity’s information security provisions are periodically reviewed to ensure compliance with the Data Protection Act 1998.
  Outsourcing
  1. It is up to you how you ensure the provider is made aware of your regulatory responsibilities and their duty to support them. This might take the form of a contract which specifies this and which includes explicit arrangements for providing us with inspection access (if needed), as well as how the agent will ensure client information security, confidentiality and quality provisions are of a high quality standard. The outsourcing arrangements are likely to benefit from periodic review and consideration within both the risk matrix and the Business Continuity Plan.
  Business Continuity Introduction
  1. There are multiple, often interconnected ways in which external disruptions can affect the critical activities required to deliver your key services. Business continuity risks include (but are not limited to): Those new to business continuity risk management may find the Direct Gov Business Continuity Management Toolkit a useful starting point.
  Good Practice examples
  1. A hard copy list of, and contact details for, persons to be contacted in the event of an emergency is kept both on-site and off.
  2. A senior member of staff has responsibility for continuity of the business in emergency (or other extenuating circumstances). Individual persons are named as responsible for particular tasks should such circumstances arise.
  3. Periodic continuity risk assessments inform a written Business Continuity Plan (BCP) and improvement plan. The assessments and BCP are updated in light of relevant changes such as organisational restructuring or external environment/market changes.
  4. The BCP includes both prevention and recovery provisions (e.g. office relocations, data back-ups, fire-drills) and quantifies the resources required over time (e.g. 24 hours, 2 days, 1 week, 2 weeks) to maintain critical activities at an acceptable level. Resources are likely to include people, premises, technology, information, supplies and partner businesses. The BCP, and systems (e.g. back-up power, communications equipment, information management, contact list and evacuation processes), are periodically tested.
  5. The BCP is communicated to staff through a training and awareness-raising programme. In the event of an emergency, employees and customers are provided with ongoing communications and (safety) briefings.
  Business Continuity - Sole Practitioners Introduction
  1. The risk to business continuity and to the interests of both the business and its clients presented by an emergency such as incapacity or death is particularly relevant to sole practitioners. The guidance below is intended to highlight issues which may arise and to provide possible solutions.  However, it is up to you to decide what options best suit your own circumstances and which will enable the business to continue to deliver positive Outcomes for Clients even in exceptional circumstances/an emergency. Considerations
  2. You may determine that specific Indemnity Insurance arrangements would be beneficial to cover the possibility of continuity being threatened by an unforeseen circumstance.
  3. In the event of a planned absence, Clients should be told who will be dealing with their matter.
  4. Should you become unable to manage the business, and need to appoint an attorney the agreement is likely to benefit from being proportionate, reciprocal and subject to periodic review.
  5. Consideration should be given as to whether the Attorney is an Authorised Person(s)/Parties Person or legally qualified only; and whether they deal with the affairs of the clients, as well as your personal and business affairs, or you appoint different individuals to manage personal affairs and those of the business.
  6. Consideration may be given as to whether your family and any employees should know of the arrangement.
  7. Arrangements may be made with a bank for named Attorneys to operate specific bank accounts. Power of Attorney may be of general or specific application. Each of these forms of authority ceases to have effect should a donor or their attorney become incapable or die.
  8. In the event of incapacity a Lasting Power of Attorney will enable another person(s) to make decisions on your behalf. Two Attorneys may be appointed jointly (i.e. must act unanimously at all times) or jointly and severally (either one will be able to act on his/her own). You may wish to consider including a Charging Clause entitling the Attorney to charge, and be paid, professional fees for managing the business. This form of authority ceases to have effect should a donor/attorney die or become incapacitated.
  9. In the event of death, a Will providing for the business to be managed in the short term, could appoint an Authorised Person(s)/Parties as Executor or alternatively, give the Executor the authority to appoint an Authorised Person(s)/Parties to manage the business. A  Charging Clause is likely to be needed. You may wish to provide specific instructions in a ‘side’ document to the Will which can be changed depending on circumstances.
  Closing of a practice Considerations
  1. Should you decide to sell, due diligence is recommended to help prevent fraudsters from purchasing the entity. Clients would ideally be informed of the ownership transfer prior to the purchase. This will enable them to make an informed decision as to whether they wish to continue with their instruction with the entity.
  2. As agreed with the client, arrangements should be made for completion of work scheduled for after the entity’s closure or transfer.
  3. Where possible, client monies, such as disbursements, should be transferred out of the client account.
  4. The planned closure should be discussed with your indemnity insurer (and run-off cover obtained as per OP3)o).
  5. Legitimate ownership of original documents and papers should be identified and client files suitably stored.
  6. Closure is often foreseeable so it is likely that you can plan well ahead, making arrangements to close or sell the practice before this happens. An ill-prepared closure is likely to result in the CLC arranging a formal intervention which is likely to be disruptive to both staff and clients. The cost of the intervention will be charged to you.
To be used in conjunction with Management and Supervision Arrangements Code.

Notification Guidance

To view the printable PDF version, please click here,
  1. Provision of adverse information under this Code does not necessarily mean we will withdraw our approval of the relevant individual. Where adverse information is provided it will be discussed with the body to determine the risk posed to the Code of Conduct’s Outcomes; resource implications for the CLC; and the individual/body’s willingness or capacity to address the issue.
  2. Examples of what is meant by ‘any other information that could reasonably be expected to have a bearing on their being fit and proper’ under requirement 14 include:
  3. An example of what is meant by ‘structural arrangements’ under requirement 7 is a body no longer registered as a Limited Liability Partnership or a Company under the relevant Acts.
  4. Persons disqualified by Licensing Authorities are identified on the Legal Services Board website.
To be used in conjunction with Notification Code.

lawyers have to hold to protect Clients against any malpractice Professional Indemnity Insurance Guidance

To view the printable PDF version, please click here.
  1. A Licence will not be issued to a Manager unless the applicable Evidence of Insurance for your Body has been produced to the CLC.
  2. As a guide to the provisions under requirement 14 a body should be able to demonstrate it can fund the self insured excess for no less than two claims per year. Examples of Limits on Self Insured Excess:
    • Fees £250,000 Maximum Excess = £200,000 X 5% + £50,000 X 3% = £11,500
    • Fees £600,000 Maximum Excess = £200,000 X 5% + £300,000 X 3% + £100,000 X 2% = £21,000
    • Fees £900,000 Maximum Excess = £200,000 X 5% + £300,000 X 3% + £400,000 X 2% = £27,000
  3. We would remind you of your responsibility under the Provision Of Services Regulations 2009  to make the following ‘available’: contact details for the Professional Indemnity Insurance provider, and the geographic coverage of that PII. It is at your discretion as to how make this available e.g. given in writing to the client at the outset, hard copy at the firm’s offices, on website, or in documents provided to the client during a transaction etc.

Transaction Files Guidance

To view the printable PDF version, please click here.   Introduction
  1. Overriding Principle 3 of the CLC Code of Conduct requires you to act in the best interests of your clients. You are not obliged to adopt the approach below, it is provided for those seeking Guidance, setting out considerations to be borne in mind in determining how the Client Outcomes sought by that Overriding Principle might be delivered. Procedures/Policies
  2. Procedures/policies which can help ensure that all transactions are of a high, consistent, quality include (but are not limited to):
  Checklists Conveyancingtransaction – procedure checklist
  1. You may wish to consider creating a transaction procedural checklist. This is likely to include:
  Probatetransaction – procedure checklist
  1. You may wish to consider creating a transaction procedural checklist. This is likely to include: Wills transactions – procedure checklist
  2. You may wish to consider creating a transaction procedural checklist. This is likely to include: * Capacity of the client relates to vulnerability factors such as their mental health and the exertion of undue influence
  Key Transaction Dates - Conveyancing
  1. It may be beneficial to include the following key dates within the transaction checklist:
  Probate
  1. It may be beneficial to include the following key dates within the transaction checklist:
  Risks 
  1. All individual files present potential risks. These may take the form of mortgage fraud/money laundering signs, involvement of a foreign jurisdiction or unique/unusual aspect of law (which may be beyond the competence of the individual), a transaction value which exceeds the firm’s insurance policy, or other. The example checklists provided at items 3-5 may aid you in identifying any inherent risks. Good Practice
  2. Staff are made aware of the broad range of potential risks and who they must report the risks to so that a determination can be made as to whether the transaction should proceed.
  3. The files of each relevant person are subject to monthly, independent, review by sufficiently competent and experienced persons. The review findings are tailored (e.g. on process, advice quality)to the individual, centrally recorded and inform the individual’s staff development programme. See also the Anti-Money Laundering and Combating Terrorist Financing, Acting for Lenders & Mortgage Fraud, and Management & Supervision Codes and Guidance. File Retention and Ownership
  4. Transaction files generally contain a mixture of papers and documents some of which belong to the Client and some to the body. In addition there may be other papers and documents which belong to another Client, for example a lender.
  5. Documents that belong to the Client:
    1. Those documents you have prepared for the benefit of the Client and which have been paid for by the Client either directly or indirectly, including:- This does not include copies of letters written to the Client which you may keep.
    2. Those documents prepared by a third party during the course of a matter and sent to you (other than those sent to you at the body’s expense). Examples are receipts and vouchers for disbursements made by or on behalf of the Client and letters received by the body from third parties.
    3. In the case of joint Clients these documents belong to the Clients jointly.
    4. In most cases it is not necessary to deliver up original documents.  However:
      • some documents (such as Wills and Deeds) only have effect on production of the original; and
      • questions about the authenticity of a document may in some instances only be determined on production of the original.
  6. Documents that belong to you:
    1. Those documents prepared by the body for its own benefit or protection, the preparation and production of which is not charged to the Client. They include:
    2. Those documents sent to the body by the Client, the property of which was intended at the date of despatch to pass from the Client to you, including letters, authorities, and instructions written or given to you by the Client.
  7. Where you acted for two or more clients and a request for the file or part of it is made by one of the clients (e.g. a lender), you should determine the ownership of the various papers in accordance with paragraphs 2 and 3 above. For example, in a conveyancing transaction there may be documents which:-
  Example Approach You are not obliged to adopt the approach below. The following are provided only as good practice considerations:
  1. To make a copy (without charge) for your own benefit of any documents released.
  2. Where documents are requested with a view to a claim being made against you (in addition to your regulatory responsibility to notify insurers of the circumstances) you should:
    • not make any admission of liability;
    • deal with the matter in accordance with instructions issued by or on behalf of the insurers.
  3. Where a file or information from a Client file is requested by a third party (such as the Police, HM Revenue and Customs or Trustee in Bankruptcy) to satisfy yourself (by the production of legal authority, preferably a court order) that the party making the request is legally entitled to the documents and information requested.
  4. Where you intend to charge for copying documents (other than where any copying is made for your own benefit) you make a reasonable charge.
  5. It is in your interests to ensure that the relevant Terms of Engagement authorise you: Destruction of file contents
  6. After the relevant minimum retention period (identified at 9 & 10), and provided you have the Client’s authority, you review the file to decide whether it may be safely destroyed. You might consider retaining separately and for a longer period the authority from the Client.
  7. If the matter involved a mortgage, then it is likely you will want to take into account any specific requirements of the particular lender.
  8. Items 9 and 10 of the Code provide minimum periods of time for which documents should be retained. Due to increasingly diverse relationships, people living longer, and growing challenges/disputes regarding a testator’s wishes, you may wish to consider retaining will documentation for much longer. Some entities may store the original documentation for 50 years from its creation, until the individual making the will would have reached 100 years of age, or indefinitely. It is likely to prove beneficial to record all contact pertinent to the transaction/service provision e.g. client’s intentions, family dynamics etc. in case a (probate or other) dispute should arise in the future.
To be used in conjunction with Transaction Files Code.

Undertakings Guidance

To view the printable PDF, please click here.   Information
  1. Neither the CLC nor its disciplinary committees has power to direct the specific performance of an undertaking or to direct the payment of compensation to a third party but the breach of an undertaking may lead to disciplinary proceedings.
  2. The CLC will treat a promise to give an undertaking as an undertaking provided the promise sufficiently identifies the terms of the undertaking and provided any prior conditions have been satisfied.
  3. Should you incur loss arising directly from a claim based on an undertaking made in the course of practice you may be entitled to an indemnity under the CLC Master Policy or other professional indemnity insurance.
  Example Approach You are not obliged to adopt the approach below. The following are provided only as good practice indicators for those seeking Guidance on how to deliver the positive Client Outcomes which the Principle of Maintain High Standards of Work seeks:
  1. To ensure that an undertaking is given only by an Authorised Person(s)/Parties or other member of staff with authority expressly given on a Durable Medium by the body.
  2. To ensure that all staff are aware of the terms of undertakings incorporated by the use of the Law Society’s formulae for exchanging contracts by telephone and its code for completion by post.
  3. To note on the file and confirm in writing to the other party any agreed variation to undertakings in the Law Society’s formulae for exchanging contracts by telephone or its code for completion by post.
  4. To note separately the terms of undertakings on file.
  5. To give an undertaking only if the Authorised Person(s)/Parties or duly authorised member of staff can be absolutely certain that it will be fulfilled.
  6. Where making or accepting an undertaking “to pay costs” specify the amount of costs since if no sum is agreed the undertaking may be interpreted as meaning “to pay reasonable costs”.
  7. To ensure the wording of an undertaking is unambiguous, since only in exceptional circumstances will extraneous evidence be admitted to clarify an ambiguity;
  8. Where an undertaking is dependent on the happening of a future event to notify the recipient immediately if it becomes clear that the event will not occur.
  9. To specify both the identity of the lender and the date of each charge it is intended to discharge in reply to any requisitions on title or otherwise.
  10. To give an oral undertaking only as a last resort and ensure that it is confirmed in writing as soon as is practicable.
  11. To avoid either giving or accepting an undertaking using terms such as “best endeavours” or “reasonable endeavours”: be specific.
To be used in conjunction with Undertakings Code.  

Regulatory Arrangements Guidance - Specific

Overview

This Guidance is here to provide useful information to the regulated community and provide example policies or procedures

Acting as insurance Intermediaries Guidance

To view the printable PDF version, please click here.   Legislative Background
  1. The Insurance Distribution Directive (2016/97/EU) requires that arrangers or sellers of insurance products be regulated. Generally providers must be regulated by the FCA (known as FSMA Authorised Person(s)/Parties). There is a limited exception for professionals, whose regulatory body is a Designated Professional Body under Part XX of FSMA. This exemption regime is designed to exclude professional firms which are not carrying on mainstream financial services activities from the requirement to be authorised by the FCA.
  2. Any body wishing to provide Regulated Activities (to include insurance services) other than as permitted by the CLC or, as appointed agent for an insurer, may only do so if regulated by the FCA.
  3. The CLC is itself regulated by the FCA and must comply with directions it is given.
  4. With the agreement of the FCA, the Council has resolved ‘’In accordance with requirement 15 of the ‘CLC’s Acting as Ancillary insurance Intermediaries Code’ each CLC Body is permitted to carry out all Insurance Distribution Activities to Regulated Services provided by that body to any Client including (without limiting the generality of this Resolution) Abortive Costs Indemnity Insurance, Household and Estate Property Insurance, Term Policies for IHT, Missing Beneficiary insurance, Deposit Guarantee Insurance and Title Indemnity Policies relating in particular to Restrictive Covenants, Absence of Easements, Insolvency Acts, Registered Possessory Titles, Lost Title Deeds, Missing Particulars (Registered Titles), Good Leasehold, Absent Landlords, Missing Rent-charge Owners, Flat/Maisonette Indemnities, Flying Freeholds, Search Indemnities, Absence of Deeds of Postponement on Right to Buy Transactions, Defective Leases, Contingent Buildings Insurance, Forfeiture of Leases (Mortgagees only), Superior Leases, Lease Enlargements, Planning Permissions, Building Regulations and Endorsements, Chancel Liability and Contaminated Land.”
  5. The term ‘’arrange’’ is wide ranging and includes helping a Client to complete a proposal form.
  6. This Code is drafted so that the range of products covered by the CLC’s regulatory arrangements may be extended by resolution of the CLC with the agreement of the FCA. Incidental
  7. The Regulated Activities you provide must be incidental in two senses:-
    (i) In the provision of a particular Regulated Activity  to a particular Client, you carry on only Regulated Activities which arise out of, or are complementary to, the provision by the body of that Regulated Activity to that Client (s.332(4) FSMA and requirement 15); and (ii) Any service provided in the course of carrying on a Regulated Activity must be incidental to the Professional Services you provide (s.327(4) FSMA and requirement 20).  
    1. The FCA considers that to satisfy the condition in s.327(4) FSMA Regulated Activities cannot be a major part of the body’s practice.
    2. The FCA also considers the following further factors to be relevant:
      1. the scale of Regulated Activity in proportion to other Professional Services provided;
      2. whether and to what extent services that are Regulated Activities are held out as separate services; and
      3. the impression the body gives, for example, though its advertising or other promotions of its services, as to how Regulated Activities are provided;
    3. In the FCA’s opinion, one consequence of this is that a body cannot provide services which are Regulated Activities if they amount to a separate business conducted in isolation from the provision of Professional Services. This does not, however, preclude it from operating its professional business in a way which involves separate teams or departments, one of which handles the Regulated Activities.
    4. For the purpose of s.327(4), Professional Services are services which do not constitute carrying on a Regulated Activity, and the provision of which is supervised and regulated by a Designated Professional Body, such as the CLC (s.327(8) FSMA and Glossary of Terms)
  8. Example: when acting for the buyer of a property you may arrange a missing landlord indemnity policy on behalf of that buyer. You may not arrange that same policy to a different client as a stand alone product. Accounts to
  9. The FCA considers that, in order for a Client to be accounted to for the purposes of s.327(3) FSMA, you must treat any commission or other pecuniary benefit received from third parties and which results from Regulated Activities carried on by the body, as held to the order of the Client. You will not be accounting to the Client simply by telling them that you receive commission. Unless the client agrees to you keeping it, the commission belongs to them and must be paid to them. There is no de minimis below which you may retain the sum. In the FCA’s opinion, the condition would be satisfied if you pay over to the Client any third party payment received. Otherwise, it would be satisfied by informing the Client of the payment received and advising the Client that they have the right to require the body to pay them the sum concerned. This could then be used to offset fees due from the Client in respect of Professional Services provided or in recognition of other services provided. However, it does not permit retention of third party payments by seeking the Client’s agreement through standard terms and conditions. Similarly, a mere notification to the Client that a particular sum has been received coupled with your request to retain it does not satisfy the condition.
Insurance Product Information Document
  1. Article 20(5) to Article 20(8) of the IDD provide as follows:20(5) In relation to the distribution of non-life insurance products as listed in Annex I to Directive 2009/138/EC, the information referred to in paragraph 4 of this Article shall be provided by way of a standardised insurance product information document on paper or on another durable medium.20(6) The insurance product information document referred to in paragraph 5 shall be drawn up by the manufacturer of the non-life insurance product.20(7) The insurance product information document shall:
    (a) be a short and stand-alone document; (b) be presented and laid out in a way that is clear and easy to read, using characters of a readable size; (c) be no less comprehensible in the event that, having been originally produced in colour, it is printed or photocopied in black and white; (d) be written in the official languages, or in one of the official languages, used in the part of the Member State where the insurance product is offered or, if agreed by the consumer and the distributor, in another language; (e) be accurate and not misleading; (f) contain the title ‘insurance product information document’ at the top of the first page; (g) include a statement that complete pre-contractual and contractual information on the product is provided in other documents. Member States may stipulate that the insurance product information document is to be provided together with information required pursuant to other relevant Union legislative acts or national law on the condition that all the requirements set out in the first subparagraph are met.20(8) The insurance product information document shall contain the following information:  
    (a) information about the type of insurance; (b) a summary of the insurance cover, including the main risks insured, the insured sum and, where applicable, the geographical scope and a summary of the excluded risks; (c) the means of payment of premiums and the duration of payments; (d) main exclusions where claims cannot be made; (e) obligations at the start of the contract; (f) obligations during the term of the contract; (g) obligations in the event that a claim is made; (h) the term of the contract including the start and end dates of the contract; (i) the means of terminating the contract.
  Enforcement: Restrictions
  1. Where the FCA makes orders affecting individual bodies, the CLC may withdraw permission.
  Disciplinary Steps
  1. Where a body is in breach of the Code the CLC, may:-
    1. impose a condition on a licence; or
    2. take disciplinary proceedings against the body and its Manager or Head of Finance and Administration;
    3. withdraw its permission.
    To be used in conjunction with Acting as Insurance Intermediaries Code.

Acting for Lenders and Prevention and Detection of Mortgage Fraud Guidance

To view the printable PDF version, please click here.   Checking Identity by Documentary Means
    1. The identity of a Borrower can be verified by checking their identity against appropriate original documents provided to you which appear to be authentic, are current and, where applicable, have been signed in the relevant place. A document or a series of documents meeting the expectations contained in Clause 3.1.6 of Part 1 of the CML Handbook is likely to satisfy the Lender's requirements.
    2. Care must always be taken to ensure that the extent of the evidence seen will also meet responsibilities for client identity verification under the Regulations and the expectations contained in the CLC’s Anti-Money Laundering and Combating Terrorist Financing Code.
    3. Clause 3.2 of Part 1 of the CML Handbook prescribes requirements for safeguards and identity checks.
  Checking Identity by Electronic Means
    1. You must obtain "satisfactory evidence of identity", which must be reasonably capable of establishing (and does in fact establish to the satisfaction of the person who obtains it) that the potential client is the person he claims to be. The CLC considers verification of identity by appropriate electronic means to be acceptable, though urges caution. Electronic evidence obtained should provide you with a strong level of certainty that any individual is the person they claim to be and that a person of that name lives at the address given using the client's full name, address and date of birth as its basis.
    2. Any system or product used must be sufficiently robust to provide the necessary degree of certainty. Data accessed from a single source (e.g. the Electoral Roll) will not normally be sufficient on its own. Some databases will offer a higher degree of confidence than others.
    3. Before using a commercial agency for electronic verification, you must be satisfied that:-
      6.1 the information supplied by the data provider is considered to be sufficiently extensive, reliable and accurate; and 6.2 the agency has processes which allow its users to capture and store the information that they have used to verify an identity.
    4. The process should be cumulative and you may consider it appropriate to seek additional evidence (e.g. a copy of a document bearing a signature and a date of birth) in all cases or, at least, where any client poses a higher risk of identity fraud, money laundering or terrorist financing, or where the result of any electronic verification check gives rise to concern or uncertainty over the client’s identity.
    5. You may wish to consider whether the provider meets each of the following criteria, namely that it:-
      8.1 is recognised to store personal data through registration with the Information Commissioner’s Office; 8.2 uses a range of positive information sources that can be called upon to link an applicant to both current and previous circumstances; 8.3 accesses negative information sources such as databases relating to identity fraud and deceased persons; 8.4 accesses a wide range of alert data sources; and 8.5 has transparent processes that enable you to know what checks were carried out, what the results of these checks were and what they mean in terms of how much certainty they give as to the identity of the subject of the identity enquiry.
    6. Data from more robust sources where inclusion is based on proof of identity (such as government departments) ought to be included (under paragraph 8.2). Negative information checks (under paragraph 8.3) minimise the risk of impersonation fraud.
    7. It is also important for:-
      10.1 the process of electronic verification to meet a standard level of confirmation before it can be relied on. In circumstances which do not give rise to concern or uncertainty, the standard level would be expected to be:
      1. one match on an individual’s full name and current address and
      2. a second match on an individual’s full name and either his current address or his date of birth.
      If the result of a standard verification check gives rise to concern or uncertainty over the Client‘s identity, the number of matches required to provide reasonable satisfaction as to his identity should increase. 10.2 You should ensure you understand the basis of the system you use in order to be satisfied that the sources of the underlying data reflect the CLC’s requirements and cumulatively meet the standard level of confirmation set out above as commercial agencies use various methods of displaying results (e.g. by the number of documents checked or through scoring mechanisms, etc).
  Transactional Considerations
    1. 1 For a registered title, the date from which the Land Registry search should be made is the date of issue of the Official Copies supplied or obtained at the outset of the transaction and the search should be made in the registered name of the Lender (and not its trading name) to avoid any conflict of priorities. 11. 2 For unregistered land, searches must be made against all names and any variations on those names on the title documentation and, where an address has changed, a search should be made against any former address and/or counties. 11. 3 For unregistered land, an Index Map Search must always be undertaken to ensure that the extent of the land to be conveyed is consistent with the title documentation and the Borrower’s understanding.
  1. In unregistered title property transactions, it is good practice both when acting for a Seller or a Buyer to make a Land Charges Search at the outset of the transaction to ascertain any entries details of which have not been supplied by the clients or are not revealed in the Abstract or Epitome of Title.
  Mortgage Fraud Guidance
  1. Mortgage fraud may be perpetrated by one or more participants in a mortgage loan transaction, including the Borrower, or by multiple parties (a mortgage fraud ring) working dishonestly together (and often in a professional capacity).
  2. Mortgage fraud is a criminal offence which can often result in imprisonment on conviction. Some conveyancers have been caught up unwittingly in a mortgage fraud, not because of any wilfully fraudulent acts on their part but because they have failed to act in accordance with this Code, neglecting to check all details of the transaction and failing where appropriate to report to the Lender for whom they are also acting. They have not appreciated that the circumstances of the transaction might lead to or give rise to fraud.
  3. Proceeds of mortgage fraud are criminal property. A conveyancer who assists in such a fraud will facilitate the acquisition, retention, use or control of criminal property contrary to s.328 of the Proceeds of Crime Act 2002. He may also aid and abet a fraud or be complicit in a conspiracy to defraud.
  4. Mortgage fraud is likely to require a report to be made to the National Crime Agency.
  5. Any attempt to deceive a Lender may expose you to civil action (e.g. breach of contract, breach of trust or negligence) and/or to disciplinary proceedings.
  Linked Parties
  1. You should always exercise caution if:-
    6.1 there appear to be links between a Buyer and Seller; or 6.2 you are acting for both parties; or 6.3 the Seller is a private company or the Seller has recently purchased from a private company and the names and addresses of the officers and shareholders of the company appear to be connected with the transaction, the Seller or Buyer.
  Concerns of variations
  1. It is in your interests to check whether:-
    7.1 the contract papers have incomplete or missing dates, incorrect descriptions or any sections (particularly the price) which have been left blank; 7.2 the price shown in the Contract and Transfer documentation differs from the amount actually being paid for the property; 7.3 any fixtures and fittings included in the purchase price materially reduce the value of the property; 7.4 the Seller is offering the Buyer any incentive(s) to buy the property unless these clearly fall within a Part 2 CML Handbook dispensation given by the Lender concerned; 7.5 any allowances are made or any other sum is being set-off against the money payable by the Buyer to the Seller (e.g. for repairs to the property): 7.6 the Buyer proposes to pay or has apparently paid a deposit direct to the Seller (except for a nominal reservation fee); or 7.7 there is anything else that affects the price of the property or the amount actually being paid for the property, however small.
  2. It is not advisable for you to determine whether any change is material. With your client’s consent, you should make a report to the Lender. It is good practice to advise clients at an early stage that
    1. it would be regarded as fraud to misrepresent the purchase price or the existence of any incentives and inducements; and
    2. you have a duty to inform a Lender of the true or underlying price actually being paid for a property.
  3. It is good practice to include a term in the Terms of Engagement permitting the disclosure to Lenders of material facts relating to the property and the Borrower client. Acting in the best interests of the Lender client
  4. In the event of the circumstances detailed in paragraph 7 your safest course of action may be to cease to act for both the Lender and the Borrower client.
  5. Where you cease to act for the Lender in such circumstances, you should return the mortgage instructions to the Lender merely stating that they are returned because of a conflict of interests (without giving any further explanation).
  Valuations
  1. It is good practice to check any valuation supplied by the Lender to check it is not:
    12.1 higher than the actual price being paid for the property or higher than might be expected for a property of that type in the location in which it is situated; or 12.2 considerably higher than the price paid for the property on any earlier sale or disposal within the last 12 months, taking into account any subsequent inflation or deflation in property prices since the date of that sale or disposal.
  2. You are not a valuation expert and cannot be expected to advise on the accuracy of a valuation. Nevertheless, a valuation which is patently out of line with the apparent value of a property may be a ground for a suspicion of fraud, particularly where there is a possibility or risk of complicity between prospective Borrowers and Valuers.
  Verifications of Signatures
  1. This can be done by examination and comparison with signatures on any other available documentation. Fraud schemes
    1. 1 Mortgage Fraud can take the form of fraud for property or profit (or both). It can be opportunistic e.g. parties misrepresenting their income or not declaring other debt obligations; or perpetrated by mortgage fraud rings e.g. organised crime syndicates overvaluing properties, ‘professionals’ not acting professionally, provision of fake IDs, fake firms, flipping, inflated, or low, property valuations, illegitimate source of funds etc. Criminal methodologies are continually evolving but fraud activities have previously included:
      1. criminals posing as the buyer’s new lawyer obtain the mortgage advance instead of the real buyer;
      2. usage of at least one ‘professional’ party to appear to verify the transaction’s legitimacy and reassure other professionals within it;
      3. fraud rings acquiring machinery which produces fake – yet undetectable as such – driving licences for ID purposes, creating fictitious nominated purchasers;
      4. fictitious property or vacant land or non-developed property (particularly targeting property clubs);
      5. selling property, at inflated values, between related private companies;
      6. back-to-back sales where the first mortgage is not registered against the property (and not redeemed upon second sale completion;
      7. Equity Release Schemes where the client sells the property to a fictitious person or mortgage mule, who takes out an inflated value mortgage and on which it makes no payments (or where the person is vulnerable and does not understand the scheme’s conditions and implications);
      8. purchasing via auction a repossessed property and (usually within a year) seeking external funding against the property, or posing as a property developer seeking bridging loans;
      9. identifying deceased estates through local papers’ notices sections, establishing identity as either the deceased person or a long-lost heir and seeking a mortgage over the existing  equity; and
      10. applying for a County Court Judgement against the owner of a repossessed/unoccupied property concerning a non-existent debt.
      Examples of linked parties and sub-sales schemes: 15.2 Sale at an inflated price to an individual by a company or other entity controlled or owned by her/him may be a device designed to raise additional finance for the company or other entity and be linked to larger-scale frauds involving tax, improvement grants, etc. Sale by a Borrower to an associate at an inflated price (known as roll-over fraud) can then enable the associate to obtain a higher mortgage. No repayments are made under the mortgage and before the Lender is able to repossess the property, it is sold to another associate for a higher price, and so on. 15.3 A Buyer at one price instructs his conveyancer that he will be selling on to a third party at a higher price where the Sub-Buyer is either one and the same person as the Buyer or an associated person where the Seller may or may not also be a party to the fraud. The Sub-Buyer third party obtains a mortgage based on the sub-sale price and secures an immediate profit. The balance between the original sale price and the higher sub-sale price is never paid or is said to be paid by the Buyer to the Sub-buyer or is allegedly set-off by the Buyer against money owed to him by the Sub-Buyer. These transactions often feature a simultaneous exchange of contracts followed by a quick completion, leaving the Lender left with a property worth the original sale-price as security for a much higher loan. A derivative of this fraud occurs where a Seller grants a lease to a Buyer at a ground rent and the Buyer then assigns the lease to a Sub-Buyer at a premium to provide the Sub-Buyer with a legal interest over which he can then obtain a mortgage.
  Summary of Possible Warning Signs
  1. The following are factors to be taken into consideration within conveyancing transactions. Where any of these factors are found the transaction should be approached with caution. That is not to say that in all circumstances listed below that mortgage fraud is likely, or is happening, but there may be increased risk to the Code of Conduct’s Outcomes. Acting for Lenders and Prevention and Detection of Mortgage Fraud Guidance Acting for Lenders Guidance 16.9 In each case you should consider whether you authority to make a report to the lender and/or whether you should cease acting for both the lender and the borrower. 16.10 The National Fraud Authority’s indicator for UK mortgage fraud in 2012 was estimated at £1 billion. The way in which mortgage fraud is attempted is continually changing; the examples given at item 15 and the possible warning signs provided above, are not intended to list exhaustively all of the areas in which extra caution should be applied. You should remain alert to any transaction, or element within, or party to it, which is unusual or raises cause for concern.
  Good Practice
  1. The following are examples of good practices which other firms have employed to help prevent, identify and mitigate fraudulent activities. You are not required to adopt these practices, they are provided for your consideration. It is acknowledged that a number the examples provided have been adopted by larger firms; you may wish to consider adopting/tailoring these practices to align with the size and client profile of your firm.
    17.1 Due Diligence
    1. Ongoing management/review of relationships with third parties
    2. Open source internet searches against other firms and its staff, including adverse information published by any relevant regulatory bodies and credit-checking
    3. Scrutinising, clarifying and verifying the information received from parties connected to the transaction, considering risks presented by new mortgage products
    4. Systems for checking the identity of foreign clients
    5. Checking that deposit monies for a mortgage transaction appear to be from a legitimate     source
    6. Considering whether property valuations appear to be reasonable
    7. If your client changes while you are acting on a transaction, contact both the old and the client so you understand the reason for the change of client and are satisfied that it appear to be for a legitimate reason
    8. Electronic identification check with  each client as soon as instruction is received; use a service provider accessing a unique system which matches identity of client using ID and verifying confidential information known only to client and provider
    17.2 Staff - Fit & Proper 
    1. Pre-employment screening of employees
    2. Staff required to disclose conflicts of interest stemming from their relationships with third parties
    3. Enhanced vetting methods -  e.g. credit checks, criminal record checks, last 5 years employment  - applied to different roles
    17.3 Staff - Training
    1. Lawyers trained to review responses given on source of funding source e.g. does the information provided fit the age/ occupation/profile of the client?
    2. Appropriately trained and experienced staff handle the process; training including mortgage fraud risks, potential risk indicators and the firm’s approach to handling the issue
    3. Detailed mortgage fraud training for staff (may include scenarios and case studies)
    4. Mortgage Fraud Awareness Manual/Test, updated to reflect new mortgage fraud trends and types
    5. Mortgage Fraud ‘champions’ offer Guidance or mentoring to staff and updates on new fraudulent methods
    6. Measure, motivate and reward staff in and the steps they take to prevent fraud
    7. All staff receive training on information security procedures
    17.4 Systems/Controls – Risk Assessment Policies
    1. Staff are encouraged to report fraud under a clear whistle-blowing policy
    2. Allocate each conveyancing file a fraud/risk monitoring level
    3. Systematically consider how management information can be improved and used more effectively to mitigate the risk of fraud; systems/procedures/training evolve according to market  intelligence/pressures (particularly concerning information security, fraud and risk        information provided by lender clients), with company AML, Fraud and Risk Policies regularly updated, communicated and training provided
    4. System alerts if lawyer on other end of transaction changes or their bank account details
    5. Reviewing negative databases, such as a list of known fraudsters and the deaths register
    6. Standard Terms and Conditions include a clause that stating the lender client will be advised of any relevant information arising; the client’s attention will be brought to the term and they have to sign their acceptance of this
    17.5 Systems/Controls - Authorisations
    1. Accounting functions and controls are separated from transactional client facing functions
    2. Money can only be taken from the client account when more than one person authorises the transaction
    17.6 Systems/Controls – Quality Assurance 
    1. Internal audit and compliance teams regularly monitor the adequacy of underlying client take-on arrangements or third party relationships
    2. A formal quality and audit framework to ensure daily quality assurance of key tasks undertaken and full compliance audits carried out on a rotational basis
    17.7 Information Security
    1. Information security management systems certified by an accredited certificate organisation
    2. Information Security systems are compliant with the Department for Business Innovation & Skills Guidance
    3. The firm has a written information security policy which a senior member of staff oversees
    17.8 Information-gathering
    1. Engage in cross-industry efforts to exchange information about fraud risks
    2. Dedicated Land Registry team producing company-wide management information
To be used in conjunction with Acting for Lenders and Prevention and Detection of Morgage Fraud Code.

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