Regulatory Pulse - 9 May 2025

Welcome to the second edition of RPC Pulse. A concise look at regulatory developments for solicitors, delivered to your inbox every fortnight.

The Last Two Weeks

The LSB published its business plan for 2025-26. Highlights include:

• A focus on professional ethics and the rule of law. "Subject to the outcome of the consultation on our proposals, we will ensure that regulators make progress on implementing our policy expectations with the objective that their regulated communities uphold high standards of professional ethical conduct, reflective of the trust placed in legal professionals and the role they play in society".
• A plan to develop, consult on and implement new policy on equality, diversity and inclusion.
• Proposals to improve access to justice and close gaps in consumer protection.
• Improving disciplinary processes among the regulators. "We propose these encompass transparency, proportionality, timeliness and consistency."

The SRA has published updated guidance on complying with the UK sanctions regime.

The latest revision of the LSAG Guidance on anti-money laundering measures for the legal profession has now been approved by HM Treasury and takes effect from 23 April 2025.

A High Court judge has decided not to start contempt proceedings against a firm which circulated an embargoed draft judgment ahead of hand-down. The "serious error" arose out of a mix-up in the firm's media management department. "So far as the court is concerned, this judgment is enough. The enquiry has been undertaken. Sufficient clarity has been achieved. Lessons will have been learned."

SSB Law has been accused of employing “unethical tactics” to retain clients who wanted to drop their cases. The LSB expects to conclude its independent review into the SRA's actions in the lead-up to SSB's collapse during the next 12 months.

The SRA fined a solicitor £13,500 for breaching the banking facility rule by making payments to a third party after conclusion of a retainer. Another solicitor was rebuked for sending an email directly to a represented opponent containing unsubstantiated allegations. The SRA also fined six more firms for breaches of AML rules. Two firms were fined at or around the £25,000 maximum, with the others receiving penalties between £1,000 and £18,802 by reference to the severity of the breaches and their respective turnover.

The High Court fined a barrister who admitted misleading a lay client £25,000, overturning a decision of the Bar Tribunals and Adjudication Service to suspend him. Applying guidance with its roots in the cases involving solicitors, the court held that the dishonesty was momentary and that exceptional circumstances justifying a lesser sanction than disbarment were therefore present. Meanwhile, the SDT struck off a solicitor who misled three clients as to the progress of their personal injury claims.

The FT asked whether corporate whistleblowers should be paid. The SRA offers little incentive for solicitors and firms to comply with their reporting obligations, including where doing so may lead to an investigation into the whistleblower: "Although we cannot guarantee that we will not take any action against you, bringing the information to us is likely to help your position considerably."

Gregory Treverton-Jones KC, who acted for a solicitor targeted in the Daily Mail 'sting' on immigration firms, who was exonerated by the SDT after the SRA intervened in his firm, has called for an overhaul of the intervention regime, describing the case as "shaming this part of our legal system to its core."

Insight

A Court of Appeal decision last year highlighted an issue with the "adequate consideration" defence under section 329 Proceeds of Crime Act 2002.

The issue is this. Let's say Bob, a criminal, instructs lawyers on a transaction, paying for their services at a market rate. The money which Bob pays to his lawyers is criminal property. In receiving payment, the firm acquires criminal property, leaving it vulnerable to a criminal charge under section 329 of POCA.

Fortunately for the firm, because it provided services under its retainer with Bob, it has a defence under section 329(c): "a person does not commit such an offence if he acquired or used or had possession of the property for adequate consideration".

Less happily for the firm, last year the Court of Appeal held in World Uyghur Congress v NCA that the provision of “adequate consideration” by someone who can rely on section 329(2)(c) does not preclude the property from being “criminal property” in the hands of someone else with the requisite knowledge or suspicion.

As a result of the judgment, whilst monies can still be received in reliance on the adequate consideration exemption, there is a risk that transferring those funds onwards (e.g. using the funds to pay disbursements) could amount to the commission of a substantive money laundering offence.

The Law Society's view is that the decision does not impose additional reporting obligations on solicitors. "Solicitors representing clients or advising on their legal rights and obligations (which requires a reasonable sum to be paid for these services) are not engaged in money laundering, other than where a solicitor is participating in money laundering, or knows, or is in fact, providing advice for the purpose of money laundering."

The LSAG does not, however, seem to be as confident. The latest iteration of its anti-money laundering guidance for the legal sector has not been updated to reflect the World Uygher Congress decision, with the Law Society simply indicating that "Discussions are ongoing with LSAG".

Where does this leave firms in practice? We think solicitors should be cautious whenever there is a risk of receiving monies which may be known or suspected to be the proceeds of crime. The "adequate consideration" defence will rarely provide a complete answer: partly due to the issues summarised above, and partly because the defence does not apply to sections 327 (concealing) or 328 (arrangements) of POCA.

The Law Society is due to host an online event on these issues on 12 June – sign up here.

Q&A

We would welcome any questions or suggestions from readers for future Insight topics. Obviously we can't comment on ongoing cases, and the views expressed in RPC Pulse are not to be relied upon as legal advice.