Frequently asked questions

Our new firm is preparing its policies and procedures to comply with the Money Laundering Regulations that came into force on 15 December 2007. Does the Law Society produce any sample/precedent client care letters?

You may wish to refer to our practice note on client care letters. Whilst it does not contain sample letters, it does provide solicitors with a client care checklist and includes sample paragraphs which you may wish to use as a basis for your client care letters.

For further guidance on precedent forms and policies please see the Law Society’s publication Solicitors and Money Laundering 3rd edition which is available from the Law Society’s online bookshop at www.lawsociety.org.uk/bookshop.

Our firm is considering becoming a Home Information Pack (HIP) provider. Do the new Money Laundering Regulations 2007 apply to the provision of this service?

No. The new regulations which came into force on 15 December 2007 contain a specific exclusion in reg 4 (1)(f) regarding HIPs, which states: 'these regulations do not apply to …. a person, when he prepares a HIP or a document or information for inclusion in a home information pack.'

Please see the anti-money laundering (AML) practice note, chapter 1.

Is it correct that the Practice Advice Service (PAS) gives solicitors advice on Anti Money Laundering (AML) queries?

The PAS can assist solicitors with navigating the AML practice note and can respond to general queries on AML compliance. It does not provide legal advice or advice on conduct issues.

Solicitors requiring legal advice on anti money laundering compliance can access an online directory of solicitors who practise in this area and are willing to be contacted by other solicitors seeking legal advice. The Professional Ethics Team still provide assistance with conduct issues relating to money laundering.

When is ‘customer due diligence’ required for the purpose of complying with the Money Laundering Regulations 2007?

Regulation 7 requires that you conduct customer due diligence when:

• establishing a business relationship
• carrying out an occasional transaction
• you suspect money laundering or terrorist financing
• you doubt the veracity or adequacy of documents, data or information previously obtained for the purposes of customer due diligence.

There is no obligation to conduct customer due diligence in accordance with the regulations for retainers involving non-regulated activities. For details of non-regulated activities please see the Law Society's anti-money laundering practice note, chapter 1.

For further information on customer due diligence, please refer to the anti-money laundering practice note, chapter 4.

I am the Money Laundering Reporting Officer (MLRO) of a firm mainly conducting regulated work, although we do identify all our clients. Fee earners sometimes approach me with the question of how to verify clients who are unable to produce the usual documents. For example, immigration clients are often unable to provide standard documentation such as passport, utility bill etc. Does the Law Society have any advice in these circumstances?

Yes. Sometimes clients are unable to provide standard verification documents. The purpose of the regulations is not to deny people access to legal services for legitimate transactions but to mitigate the risk of legal services being used for the purposes of money laundering. You should consider whether the inability to provide you with standard verification is consistent with the client's profile and circumstances or whether it might make you suspicious that money laundering or terrorist financing is occurring.

Where you decide that a client has a good reason for not meeting the standard verification requirements, you may accept a letter from an appropriate person who knows the individual and can verify the client's identity.

For example:

• A refugee might be able to provide a letter from the Home Office confirming refugee status and granting permission to work, or a Home Office travel document for refugees.
• An asylum seeker might be able to provide their registration card and any other identity documentation they hold, or a letter of assurance as to identity from a community member such as a priest, GP or local councillor who has knowledge of the client.

For further information, please see our anti-money laundering practice note

I have been asked to hold funds as an escrow agent by a company that wishes to purchase an aircraft. What do I need to consider in light of the Money Laundering Regulations 2007?

Solicitors are involved in regulated activity when they participate in a financial transaction concerning:

• the opening or management of bank, savings or securities accounts and
• the managing of client money, securities or other assets

As such it is likely that acting as an escrow agent in a commercial transaction is within the regulated sector.

In addition to identify information, you should consider the checks you wish to make about the funds you intend to hold. This should be done before the funds are received. Consider also whether, it would be appropriate to conduct customer due diligence measures on all those on whose behalf you are holding funds, rather than just your client.

For further information, please see our anti-money laundering practice note.

We are preparing client care letters. In our terms of business we would like to include a paragraph that outlines our reporting obligations under the Money Laundering legislation. Would this contravene 'tipping off' provisions?

It is not tipping off to include a paragraph about your obligations under the Money Laundering legislation in your terms of business.

Please see our practice note on client care letters which provides the following wording by way of example:

'We are professionally and legally obliged to keep your affairs confidential. However, solicitors may be required by statute to make a disclosure to the Serious Organised Crime Agency (SOCA), where they know or suspect that a transaction may involve money laundering or terrorist financing. If we make a disclosure in relation to your matter, we may not be able to tell you that a disclosure has been made. We may have to stop working on your matter for a period of time and may not be able to tell you why.'

Read the practice note on client care letters

I act for a first time buyer in a conveyancing matter. My client will be obtaining a mortgage and a proportion of the deposit will be provided by my client’s mother. What do I need to consider in terms of anti-money laundering issues?

Third parties often assist with purchases, for example relatives often assist first time home buyers. You may be asked to receive funds directly from the third parties. You will need to decide whether, and to what extent, you need to undertake any customer due diligence measures in relation to the third parties.

Consider whether there are any obvious warning signs as outlined in chapter 11 of our anti-money laundering practice note. You should also consider what you know about your client, the third party, their relationship and the proportion of funding being provided by the third party.

Consider your obligations to the lender in these circumstances. You are normally required to advise lenders if the buyers are not funding the balance of the purchase price from their own resources.

For further information please see our anti-money laundering and mortgage fraud practice notes.

We are in the process of setting up systems and procedures in compliance with Regulation 20 of the Money Laundering Regulations 2007. We cannot find any guidance as to who in the firm is qualified to be a nominated officer. Further, is this the same as a money laundering reporting officer or do their roles vary?

A nominated officer is also commonly referred to as a money laundering reporting officer (see the Definitions and Glossary section of our anti-money laundering practice note.

There is no specific qualification criteria. Your nominated officer should be of sufficient seniority to make decisions on reporting which can impact your firm's business relations with your clients and your exposure to criminal, civil, regulatory and disciplinary sanctions. They should also be in a position of sufficient responsibility to enable them to have access to all of your firm's client files and business information to enable them to make the required decisions on the basis of all information held by the firm.

Firms authorised by the FSA will need to obtain the FSA's approval to the appointment of the nominated officer as this is a controlled function under section 59 of the Financial Services and Markets Act 2000.

For further information, please see Chapter 3 of the anti-money laundering practice note.

I act for a group of claimants in relation to Multi-Party Action. A Group Litigation Order (GLO) has been granted. My colleague informs that we need to forward a copy to the Law Society. Is this correct?

Yes. Practice Direction 19B on Group Litigation that supplements Section III of the Civil Procedure Rules Part 19 states that after a GLO has been made, a copy of the GLO should be supplied to:

• The Law Society (Practice Advice Service), 113 Chancery Lane, London WC2A 1PL; and
• The Senior Master, Queen's Bench Division, Royal Courts of Justice, Strand, London WC2A 2LL.

The Practice Advice Service operates the Law Society's Multi-Party Action Information Service (MPAIS). For further information please telephone 0870 606 2522.

I understand that there is a pre-action protocol for possession claims based on rent arrears. Is this correct?

Yes. The pre-action protocol came into force on 2 October 2006 and it applies to residential possession claims by social landlords which are based solely on rent arrears.

It can be found on the Ministry of Justice website in the Civil Procedure Rules section.

I am acting in the purchase of a residential property. My client is anxious to take advantage of the current Stamp Duty Land Tax (SDLT) 'holiday' which exempts any acquisitions of residential property of not more than £175,000 from SDLT. I know this exemption ends on 31 December 2009 but am unsure whether contracts must be exchanged by that date or whether the transaction must be completed by then.

HM Revenue and Customs produces a helpful leaflet entitled SDLT: Temporary Increase in Thresholds (PDF). This states that the exemption applies to land transactions where the effective date for SDLT purposes is before 1 January 2010.

Paragraph 6 confirms that 'the effective date is normally the date of completion, not the date of exchange of contracts. However, the effective date may be earlier than the date of completion if the contract is substantially performed, for example, if the purchaser takes possession or pays the purchase price in advance of completion.'

I am proposing to use the Standard Commercial Property Conditions of Sale in a transaction. Which is the current edition and where can I obtain them from?

The current edition of the Standard Commercial Property Conditions is the second edition which took effect on 1 June 2004. The Conditions are available from the following suppliers:

• IRIS Software and Services (IRIS Laserform) - www.iris.co.uk
• LexisNexis (Everyform) - www.lexisnexis.co.uk
• Oyez Straker - www.oyezstraker.co.uk
• PEAPOD LEGALOffice Ltd - www.peapod-legal.co.uk
• Shaw & Sons Ltd - www.shaws.co.uk

For more information regarding the Conditions, please see the Law Society's Conveyancing Handbook 15th edition, available from www.lawsociety.org.uk/bookshop.

What are the categories of fee earner as outlined in the Supreme Court Costs Office (SCCO) Guide to Summary Assessment of Costs.

The grades of fee earner have been agreed between representatives of the SCCO, The Association of District Judges and the Law Society. There are four grades of fee earner:

1. Solicitors with over eight years' post qualification experience including at least eight years' litigation experience.
2. Solicitors and legal executives with over four years' post qualification experience including at least four years' litigation experience.
3. Other solicitors and legal executives and fee earners of equivalent experience.
4. Trainee solicitors, paralegals and other fee earners.

Note: ‘legal executive' means a Fellow of the Institute of Legal Executives .

See the Court Service website at www.hmcourts-service.gov.uk.

Do you have any information on Wasted Costs Orders in criminal matters?

Yes. When a court is considering making a Wasted Costs Order it should follow the guidance set out in the provisions of the Practice Direction (Costs: Criminal Proceedings) [2004] 2 All ER 1070 Part VIII.1: Costs against Legal Representatives.

Of particular importance are the following requirements:

• The court must formulate carefully and concisely the complaint and grounds upon which a Wasted Costs Order may be sought.
• The court should allow the solicitor to make representations. The solicitor should formally be told clearly what he or she is said to have done wrong and invited to comment.
• The solicitor alleged to be at fault should be given sufficient notice of a complaint made against him or her, and given a proper opportunity to respond to it.
• The court should make full allowance for the possible difficulty caused by client confidentiality/legal professional privilege for a legal representative in answering criticism.
• Where a legal representative is precluded by legal professional privilege from giving a full answer to any criticism, a court should not make such criticism unless, proceeding with extreme care, it is satisfied that there was nothing that the representative could say, if permitted, to answer the criticism and it was in all of the circumstances fair to make such criticism.
• The court must be satisfied that there has been an improper, unreasonable or negligent act or omission and that, as a result, costs have been incurred by a party. A mere mistake is not sufficient to justify an order – there must be a more serious error. The primary object is not to punish but to compensate.
• The principles of the court's Wasted Costs Order jurisdiction (especially in relation to the solicitor's duties when a client fails to attend trial) were reviewed by the Court of Appeal (Criminal Division) in Re: Mr Harry Boodhoo, Solicitor [2007] EWCA Crim 14 and practitioners are encouraged to read the Court's judgment.

Please see our practice note on the Criminal Procedure Rules 2005.

I am acting for a defendant who is charged with a sexual offence involving a child complainant. Before they provide me with disclosure, which includes a copy of a DVD of the child's statement to the police, the Crown Prosecution Service has asked me to sign an undertaking that I will ensure that it is kept in a secure container, and that I will not release the DVD recording to my client. I am prepared to sign such an undertaking, but wonder whether the Law Society has an agreed form that the undertaking should take?

There is an agreed form of undertaking, which forms part of Rule 11 of the Solicitors' Code of Conduct 2007 which relates to litigation and advocacy. This was agreed by the CPS and the Law Society many years ago. Rule 11.08 relates to undertakings regarding a recording of a child witness' evidence. It may be that the undertaking you give could be in the same form as that appears in the Rules. As with any undertaking, before giving it you must ensure that you will be able to comply.

Read rule 11.08

I have a client who wishes to give her home to her daughter. Does the Law Society have any guidance for solicitors dealing with these types of cases?

Yes, you may find our practice note 'Making gifts of assets' helpful.

I am preparing a Lasting Power of Attorney (LPA) for an elderly client. The form requires the certificate provider to confirm that he or she is acting independently of the donor and in particular is not is not a person listed in the disqualification criteria. Does this mean I am not regarded as independent and so cannot provide the certificate?

The Law Society's view is that Regulation 8(3) of the Lasting Power of Attorney, Enduring Powers of Attorney and Public Guardian Regulations 2007 No.1253 sets out the disqualification criteria. This does not include the person who assisted in the preparation of the LPA.

Our interpretation is that as long as the solicitor is not a donee of the LPA and is not within the disqualification criteria of Regulation 8(3) then they can be the certificate provider. It is also our view that if it had been intended that a solicitor should not perform both roles, it is highly likely that there would have been something to this effect in the Regulations.

We therefore interpret the reference to 'independent' person in relation to the categories in Regulation 8(3) as someone who is unconnected with the donor in terms of family relationship and is not a donee of the power or associated as an employee/director/partner/care home staff of a donee of the power, i.e. is independent of the person(s) exercising the power.

We have also received confirmation that the Public Guardian would treat such as LPA as valid unless there is a court decision to the contrary (i.e. if someone successfully objects to its validity on that ground).

Our practice note on Lasting Powers of Attorney may be of interest.

My client is abroad on business and urgently needs to swear an affidavit for use in court proceedings here. Can I send the affidavit to him for swearing abroad?

Yes. He can swear it before any person who has authority to administer an oath in that place (Commissioners for Oaths Act 1889 s3(1)).

Alternatively, s6 (as amended) of that Act empowers every British ambassador, envoy, minister, consul and other officials exercising their functions abroad to administer oaths there.

Please see the Law Society's book 'Execution of Documents' which is available from our book shop online at www.lawsociety.org.uk/bookshop.

I am instructed by two residuary beneficiaries in a probate matter. The lay executor is not represented and is being obstructive and is deliberately delaying the administration of the estate. Is it possible to make an application to have the executor removed and have our clients substituted instead?

Yes, an application for the removal of a personal representative (PR) may be made under the Administration of Justice Act 1985 s50. In the case of Loftus Deceased (2005) EWHC 406 (Ch) the court held that removal under s50 is a matter for the discretion of the court, and it is reasonable for the court to take a pragmatic approach, to consider the views of the beneficiaries and the interests of the estate as a whole.

Claims under s50 must be brought in the High Court and are assigned to the Chancery Division. Every PR of the estate must be joined as a party. You must also apply to have your clients substituted as the executors.

The claim form must be accompanied by

• a sealed or certified copy of the grant of probate
• written evidence containing the grounds of the claim and, so far as it is known to the claimant,
  • brief details of the property comprised in the estate,
  • an approximate estimate of its capital value and any income that is received from it,
  • brief details of the liabilities of the estate,
  • the names and addresses of the persons who are in possession of the documents,
  • the names of the beneficiaries and their respective interests in the estate,
  • the name, address and occupation of any proposed substituted PR.

For further guidance see the Law Society's Probate Practitioner's Handbook, 5th Edition, available from the Law Society's online bookshop.