24 July, 2023
The CLC's annual Risk Agenda brings together a list of the biggest risks faced by the CLC’s regulated community, which emerge during its regular monitoring and inspection work throughout the year, along with advice to help practices stay on the right side of compliance.
Areas covered in the Risk Agenda 2023 include anti-money laundering, conflicts of interest, sanctions, the Accounts Code and complaints handling.
Breaches of undertakings are a new addition this year. “This is of significant concern; the property transfer system will break if conveyancers do not adhere to undertakings,” it says. The CLC intends to run a webinar on the issue later in the year.
While 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, the breach of an undertaking may lead to disciplinary proceedings.
The Risk Agenda warns: “The CLC is escalating its activity on this issue and tracking practices where we are seeing repeated or systemic breaches.”
Elsewhere, conflict of interest issues were also identified as CLC-regulated practices are allowed to act for more than one party to a transaction with informed written consent, although each party must be represented by different fee-earners operating as though they were members of different entities. The fee-earner does not need to be a licensed conveyancer or other authorised person, but their direct supervisor does.
There is obviously a heightened risk of conflict of interest in such situations and the CLC requires that people of an appropriate level of seniority handle the matters to ensure they recognise any conflict that may arise.
“However, we have seen examples of unauthorised individuals with inadequate supervision handling such transactions. This is not acceptable,” the Risk Agenda says. “If the nature of a practice’s structure means it cannot meet the requirements for acting for both sides in a transaction, then they must not take on the second client.”
The CLC Adjudication Panel last year reprimanded and fined a licensed conveyancer who failed to inform clients in three matters that she had been asked to act for another party in the transaction. And she was the sole conveyancer in the practice, meaning she would personally be undertaking the work.
She believed she was acting in both clients’ interests by doing so as the transactions would proceed more quickly. The panel found there was “no way” in which the potential conflict could be surmounted in such a situation.
On AML, and particularly checking the source of a client’s funds, the CLC says that, while some other regulators advise a risk-based approach, it believes that the higher risk associated with conveyancing means that practices must undertake source of funds checks on every transaction.
The Risk Agenda also outlines concerns that conveyancers are often not undertaking matter-based risk assessments because they do not perceive a transaction to be risky. “In the conveyancing sector, which has been assessed as high risk in the National Risk Assessment of 2020, this is not good enough – you have to show you have considered the risk and then used that assessment to decide what level of client due diligence you will undertake.”
It adds: “The CLC is concerned that matter-based risk assessments are too often not being done or not comprehensive enough. We are now looking to move to disciplinary action for practices where we have identified a pattern of failure.
CLC Chief Executive Sheila Kumar says: “Conveyancers are at the frontline of the battle against economic crime and as a result the pressures on them are considerable. This latest iteration of our Risk Agenda looks to pinpoint the particular problems we are finding in this and other areas of practice and explain how best to resolve them.
“This is core to the CLC’s approach of assisted compliance: working with practices to identify and address risks before they crystallise as harms. This collaborative approach to achieving compliance is a unique strength of the CLC model and is successful in resolving the vast majority of issues that we find.”