Risky Business

An observation from the trenches: Conveyancing lawyers aren’t very good as assessing risk. They tend to overinflate those that have the lesser ramification and underestimate those that pose a real threat.

To be fair, they are in good company. Lots of business focus on risks that simply don’t exist or, at most, pose little threat. Does an airline pilot really need to surrender his tweezers at airport security when he's about to board an aircraft equipped with an axe on the back of the cockpit door? Can a mobile phone really cause a major explosion at a petrol station?

Many a lawyer would think that the  exposure to claims results from a drafting error or  lack of knowledge.  Insurance company research,  however, shows that just one in eight claims against law firms arises from lack of legal knowledge, while one in three claims is sparked by seemingly small mistakes in ‘legal housekeeping’. One only needs to review the latest question identified on PI renewal forms so see that these are areas of concern.Yet law firms concentrate their resources on developing legal expertise rather than improving administrative processes.

Identifying real risk is difficult. Contrary to public opinion, conveyancers are human and, like most people, exaggerate spectacular but rare risks and downplay common risks.

I am sure that many conveyancers can think of examples where a  lawyer acting for a purchaser has raised an issue that is never likely to result in a claim. I am all for making sure that you look out for issues that concern the buyer or borrower -- and by all means check that there is are guarantees for woodworm treatment etc. But has a lawyer ever been sued for not making sure that a dry rot guarantee has been assigned?

On the other hand, some lawyers tend to forget that the lender is also the client and there are detailed, strict lender requirements that change often. This is where the frequency and volume of claims occur. It is failing to comply with those obligations that potentially cripples a firm. The evidence is clear: Nearly 25% of all claims against solicitors as a whole are lender driven.

An evidenced-based approach to risks in questioning the frequency of claims is what Lexsure focused on when building COMPLETIONmonitor. Of course firms can add questions to their checklist but the core of system focuses on where the most common areas of claim are.

In the case of Risk Management, Denial IS Just a River in Egypt

Can conveyancing be better risk managed?

To a room full of lawyers, the answer to this question is so obvious that you would be forgiven for feeling silly for asking it. However, sit opposite a law firm owner and you may find that they are far more comfortable responding “no”. Yet more than that, it would likely be followed with the statement that “it’s most other firms which are in need of better risk management, not us.” Better risk management is for others.

The difficulty with risk analysis conducted by solicitors for themselves is that it to be done right it requires an objective perspective; which, by definition, is an impossibility. Just as Snow White’s tormentor got the same self-sure answer when she asked “Mirror, mirror, on the wall...”, for most solicitors, it's a foregone conclusion.

This surprises me because there's just so much evidence to the contrary. But, don’t just take my word for it, ask PI Insurers. Residential and commercial conveyancing work undertaken by solicitors accounts for the most claims against the profession, both by number and value, by a significant margin.

The easiest thing to do is accept that everything is fine. When you assume this, all the responsibility for outcomes disappears, and you can relax. Ignore the threat; what a wonderful strategy.

If you accept the results you've gotten before, if you hold on to them tightly, then you never have to face the fear of the void, of lifting up the carpet to see what is underneath.  

However, fear is the driving force here. Better risk management might be difficult. Better might involve an investment time and a change of culture, but better is definitely possible. And the alternative is dangerous.

We see it in the behavior of some of the firms that sign up to Lexsure's COMPLETIONmonitor. Some 25% of those signing up waited more than 12 months between reviewing the software and actually signing up. What changed their minds? Claims.

Using risk reduction software to save law firms "tens of thousands of pounds"

Legal risk software house Lexsure and AmTrust Europe Limited, an ‘A’ rated insurance company, have signed a groundbreaking agreement that for the first time links the use of risk mitigation software with lower expenditure on professional indemnity (PI) premiums for law firms, a move that could be worth tens of thousands of pounds for some firms.

Professional indemnity premiums are a great concern for law firms, as, particularly for smaller firms, they can constitute one of the largest costs to the business aside from salaries. Furthermore, a practice that is refused PI cover can be forced to go out of business, a fate that befell some firms in England and Wales last year.

Now, for the first time, law firms can evidence their lower risk profile for conveyancing transactions by using Lexsure's COMPLETIONmonitor software, an online checklist, tailor-made for conveyancers to reduce and eliminate errors and omissions.

COMPLETIONmonitor has previously been recognised as a valuable risk mitigation tool but AmTrust have now taken an innovative step and will reward firms that reduce their risk profile by using COMPLETIONmonitor in the conveyancing process. Firms who insure with AmTrust can expect a per case savings on their PI renewals for each case completed with the software. Even for small firms with active conveyancing practices, this is likely to result in a saving of thousands of pounds. 

Russell Newell, Head of Professional Indemnity at AmTrust Europe, said ‘We appreciate that the cost of PI insurance premiums has a great impact on law firms, particularly for firms that do a lot of conveyancing, due to the frequency and size of claims in that field. We believe it is right and fair to offer a financial reward to firms that empirically demonstrate risk mitigation by using COMPLETIONmonitor'.

COMPLETIONmonitor’s AML Module Anticipate SRA Risk Concerns

As the Solicitors Regulation Authority (SRA) has identified money laundering as one of the two biggest current risks to law firms, it’s worth reviewing how COMPLETIONmonitor’s Anti-Money Laundering Search module helps law firms spot and mitigate the risk in conveyancing transactions. 

AML Search is a powerful and robust online anti-money laundering and identity verification service. With the underlying data provided by Equifax, COMPLETIONmonitor have access to a range comprehensive and in-depth information that gives law firms an effective tool to tackle the threats presented by money launderers and terrorist financiers.

The risk itself is not new, but the “the techniques used and the context in which it takes place are constantly changing and becoming ever more sophisticated”, according to the regulator. That’s why the SRA has made a priority risk of money laundering stemming from inadequate systems and controls over the transfer of money. 

In short, COMPLETIONmonitor’s AML search:

• Conducts searches against the Equifax database
• Automatically flags non-compliant files and allows you to take remedial action
• Enables the MLRO to set and control their AML policies and procedures by pre-determining which checks are carried out and what pass criteria need to be met
• Allows Compliance Officers and the MLRO to demonstrate to the SRA that the firm has a robust systems in place for monitoring compliance and ensuing remediation or any potential breaches of your AML policies & procedures.

If integrated with COMPLETIONmonitor, high-risk cases can be automatically frozen, preventing the case from being signed off until further investigation is completed.

We developed COMPLETIONmonitor’s AML search for law firms to address the latest anti-money laundering regulations and operational challenges. The search offers an extensive selection of checks on individuals, all available through a single search encompassing proof of residency checks, proof of identity checks and alert notifications. For extra convenience and ease of use, we provide an innovative AML Profile and ‘pass or refer’ outcomes (with warnings where appropriate).