The compliance landscape within the legal industry is constantly changing. A seemingly harmless non-compliance hiccup can trigger irreparable reputational and financial damages for a law firm. Legal regulatory bodies continue to keep a close watch on every business as we speak.
With so much at stake for any act of noncompliance, the perfect time is now for law firms to get their compliance act together. Here, we discuss five of the most important reasons why your law firm must maintain 100% compliance at all times.
Compliance with Regulations
Every law firm is obliged to understand and abide by the rules, legislation, and regulations that govern their industry.
Staying afloat with both regulatory requirements and changes is by no means a walk in the park. After all, handling the intricacies of working across a variety of jurisdictions cannot be performed over a simple Excel sheet. It demands the expertise of compliance professionals. They help assign individual accountability for the firm’s regulatory obligations, take care of all compliance processes, track progress, craft corrective actions, and make way for comprehensive audit processes.
A great compliance team also monitors where compliance stands in the firm’s internal values, procedures, and processes. They further strengthen the compliance pillar by deploying a series of questionnaires, online policy attestations, checks, and surveys to ensure everyone is on the same compliance page.
Adapting to Constant Change
Uncertainty is perhaps the only thing that is certain in today’s legal compliance landscape. Regulations and guidelines constantly evolve. Or they change completely. So, what happens when law firms fail to stay ahead of these regulatory changes?
Your firm may take steps it thinks are right, only to discover the rules have already been updated. In some cases, teams even end up misinterpreting what they believed to be right initially.
Keeping up with legal compliance may seem like an uphill task given how every process demands time and financial resources. However, this is a task that must be fulfilled. A great way to handle this would be to incorporate a solid case management system to ensure compliance with anticipated changes, boost compliance efficiency, and effortlessly adapt to these changes.
Shields From Financial and Reputational Damages
The price of non-compliance is high. No, we’re not just talking about hefty fines here. A pandora’s box of costs is unleashed when a policy is found to be outside compliance standards or when the time comes to handle an enforcement action.
The organization is forced to let go of the opportunities and lose its competitive advantage when a regulatory infraction breaks down on it. When a compliance issue makes its way to the headlines, the firm even ends up losing its credibility.
Compliance is a non-negotiable element to safeguard your firm’s brand name and status, avoid reputation damages and brand trust loss, and erase the debacle of millions in regulatory fines.
Prevents Financial Crimes and Integrity of Services
As with businesses of any kind, money laundering is rampant in law firms. To keep financial crimes at bay and shield the integrity of their services, law firms must know who their clients are and where the money pours in from.
Aside from abiding by Anti-Money Laundering (AML) laws, law firms must also perform comprehensive client due diligence. Whom is the company ultimately working for? What are the risks (if any) that may be involved when working with them?
A firm-wide vigilance against money laundering (or financial crimes of any sort) and a solid commitment to compliance can help carry out smooth AML management and client due diligence. This includes staying ahead of regulatory changes, conducting periodic audits, and building (or hiring) and solid compliance team.
Effectively Addresses Conflicts of Interest
The legal environment puts strict ethical guidelines in place to ensure attorneys always put the interests of their clients first. Despite the best intentions, however, conflicts of interest always make their way within the business. When this happens, the attorney’s duty to prioritize their clients’ interests gets compromised.
Conflicts can arrive in various ways such as representing parties with competing interests, acting for both clients within the same transactions, or even showing a personal interest in the situation. These conflicts often result in regulatory breaches that can cost the law firm an arm and a leg.
The compliance team of a law firm plays a critical role in ensuring attorneys abide by codes of conduct legal regulators issue. Their most important goal lies in detecting conflicts before they unfold and crafting strategies to resolve them. They also ensure solid, firm-wide implementation of policies and procedures to mitigate any repercussions from conflicts of interest or regulatory breaches of any kind.
On a regular day, you’ll see a compliance team conducting audits, monitoring attorneys’ activities, and offering support and training to ensure everyone within the firm comply with regulations, puts their best ethical foot forward, and maintains public trust within the industry.
Boost Credibility and Improve Client Retention
Let’s face it: no client would want to shake hands with a law firm that has a history of noncompliance. What’s more, in a world dominated by social media, the smallest whiff of noncompliance can translate into a full-blown scandal in no time.
On the other hand, when no regulatory requirement goes “unfollowed” and the firm’s compliance standards remain top-notch, efficiency naturally peaks, and stakeholders’ trust is easily maintained. In addition, a fully compliant law firm ensures clients have faith in the way it operates and gives them assurance about how their issues are managed by capable hands.
Wrapping Up
Maintaining compliance is critical but not necessarily the easiest task for a law firm to accomplish. This is why most businesses outsource to both save the costs of maintaining and training in-house compliance teams and upholding the highest standards of compliance.
By trusting a competent compliance firm with their risk and compliance functions, law firms can breathe a sigh of relief knowing their compliance activities will be handled by knowledgeable professionals who know what they are doing.