The legal sector is experiencing an unprecedented period of change, is increasingly over supplied and faces further regulatory pressures. Key challenges can be identified as new entrants to the market in
the shape of non-lawyers and non-law firms delivering legal services via Alternative Business Structures [ABS], mounting cost pressures, and the introduction of technology that is transforming the way that legal services are delivered.
The Legal Services Act 2007 has allowed for full external ownership of law firms in England and Wales which has seen banks, retailers and insurers introducing consumers to new models of legal service delivery. Household names with big marketing budgets are aiming to acquire work in high volume by working on low profit margins. Commoditisation can be seen as a feature of some of these new models. Meanwhile, the Civil Justice Reforms [CJR] came into play in April 2013, bringing an end to referral fees, the recoverability of success fees and insurance premiums from defendants and introduced damage based agreements and qualified one way costs shifting. Fixed recoverable fees via the Claims Portal have reduced and the range of fast tracked fixed fee cases extended. At the same time the Legal Aid Sentencing and Punishment of Offenders Act [LASPO] facilitated further cuts to legal aid funding and a subsequent reduction in legal aid suppliers.
Set against these regulatory and cost pressures, the Solicitors Regulation Authority [SRA] announced a new principles and outcomes based regulatory framework in May 2014, which will require firms to re-evaluate their processes in order to demonstrate compliance. The Transport Select Committee is also gathering evidence for a report into whether the surge in Alternative Business Structures [ABS] is related to paths to circumnavigate the referral fee ban. If found to be true, arguably, further regulation is likely.
It is not surprising that these difficult trading conditions are giving rise to an increase in M&A activity and consolidation in the market.
And yet, despite this backdrop as a context, the Law Society cites compliance with money laundering regulations as one of the biggest challenges for UK solicitors. This statement is clearly related to the commercial and reputational risk associated with non-compliance.
Claimant lawyers are not covered by the 2007 Money Laundering regulations and are not legally bound to carry out AML checks.
However, innovation and adopting new practices, in particular identity validation, could be one of the answers to protecting their revenue streams in the current environment.
In today’s post Jackson landscape, if a claimant lawyer accepts a client or registers a claim on the Claims Portal, without applying early and relevant due diligence, they run the risk of expending time and resource progressing a claim which ultimately could be declined and for which they will not receive their fixed fee.
Furthermore, there are discussions that could lead to the introduction of a charge for each claim registered on the portal by a claimant lawyer. There are a number of internet based ID Validation and AML services available to the legal sector. For claimant lawyers who often deal with their clients remotely, these could represent a time and cost efficient way of gaining some reassurance in relation to their customer, whilst protecting their revenue stream and reputation.
CRIF is aligned to the challenges facing the legal sector and already provides a successful, sector specific identity verification solution. We are agents for change and we believe this period of flux in the market can act as a catalyst for further innovation and opportunity for law firms to generate new revenue streams and reinvigorate dormant markets.
We are currently investing in R&D to develop our offerings and further support our legal clients and we are keen to hear from the market on what additional online services would be beneficial.
