Sam Suri looks at how technology can help ease the conflict-checking and compliance burden
Clients are increasingly seeking to validate law firms’ risk management and compliance methods in their selection processes. According to Richard Daniel, chief operating officer of legal and compliance at Barclays Bank, this includes conflicts management and confidentiality. He says: “Protection of a law firm’s reputation is what keeps them in business and this tends, therefore, not to be a source of competitive advantage but a core value.”
Apart from higher client expectations and increased competition, tighter regulations mean that law firms must adjust to address their compliance obligations.
The Solicitors’ Code of Conduct 2007 represented a significant overhaul of the regulations affecting solicitors, particularly in the areas of client relations, business management, conflicts of interest and confidentiality. Most law firms already use technology to some extent to help them identify conflicts and protect client confidentiality. Some risk managers will even state that compliance cannot be achieved without technology to complete necessary processes faster and more reliably than people.
The key is to use the right technology but also use the appropriate people where judgement is required.
Rule three of the code defines a conflict of interest as existing if “you owe, or your firm owes, separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict”. Where a conflict has been identified, a firm can only act for both clients with informed consent and if one of the exceptions applies, namely the different clients have a substantially common interest in relation to that matter, or are competing for the same asset.
Law firms that do not have the benefit of conflict-checking teams often use traditional round-robin emails to identify potential conflicts before accepting a new instruction from a client. Such emails are a good way to identify commercial as well as ethical conflicts and can be a useful way of raising internal awareness of the work the firm is undertaking. However, they have two key risks:
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