Risk management and regulatory compliance: protecting your law firm from the inside out
Introduction: compliance isn’t just paperwork – it’s about what comes in and what goes out
Risk management and regulatory compliance sit at the heart of every well-run law firm. Even before accepting a new client, you’re responsible at this early stage not only for complying with a complex regulatory framework, but also for protecting the information, funds and data that flow into – and out of – your business.
When working with law firms on compliance and system training, one thing becomes clear very quickly: compliance covers far more than a single checklist. It begins from the moment you first come into contact with potential new clients through identity, anti-money laundering (AML) and conflict checks, covers how confidential information is stored, accessed and protected over time, spans financial management responsibilities to safeguard office and client funds, and encompasses myriad other obligations relating to matter management.
Compliance is best understood in terms of inputs and outputs. What data, money and documentation are coming into the law firm? And, just as importantly, what could potentially leave it? With increased regulatory scrutiny, evolving technology and the growing use of AI, law firms need structured, reliable processes that reduce risk without adding to the workload.
The regulatory landscape law firms must navigate
Legal compliance is not one single obligation. It’s a complicated web of overlapping rules, legislation and standards, some mandatory and some optional. These comprise:
SRA Standards & Regulations (STaRS)
The SRA Standards and Regulations must be adhered to at all times. They govern how solicitors behave, how matters are managed, how clients are treated. and how risks are identified and controlled. Law firms can be audited by the SRA at any point, and compliance must be demonstrable, not assumed.
SRA Accounts Rules
The SRA Accounts Rules (or CLC Accounts Code for conveyancing specialists) regulate how client and office money is handled. Law firms should be able to show that funds are held correctly, transactions are accurate, and breaches are identified and rectified promptly. Even small errors can escalate rapidly if they go unnoticed.
Financial compliance is an area where lack of visibility creates significant risk, particularly in busy practices where volumes are high and pressures are constant.
Data protection: GDPR and the Data Protection Act 2018
Compliance extends well beyond pre-onboarding and onboarding. Law firms routinely hold sensitive personal data, including copies of passports, driving licences and other identification documents.
Once this data is collected, firms must consider where it is stored, who can access it and how it is shared. GDPR and the Data Protection Act 2018 require European and British law firms to safeguard personal data appropriately and to minimise the risk of breaches. A failure here can affect not only the practice but also its clients, compounding regulatory and reputational repercussions.
Anti-money laundering and financial crime legislation
Law firms must also comply with a range of legislation designed to prevent financial crime, including the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, Proceeds of Crime Act 2002 and Terrorism Act 2000.
Anti-money laundering remains a particularly high-risk area for the profession and continues to attract attention in the legal press, not least in relation to the Financial Conduct Authority taking over the helm as our country’s AML regulator. Expectations around client due diligence, source of funds and ongoing monitoring are increasing, and failures can carry serious consequences.
Lexcel: optional, but influential
The Law Society Lexcel standard is an optional accreditation, but one that many law firms use to embed good practice. It focuses on how matters are run, how clients are cared for, and how quality and consistency are maintained.
Although Lexcel isn’t essential, it provides a structured framework for reviewing compliance regularly. Many law firms find Lexcel processes keep them audit-ready and reinforce best practice across the business, complementing SRA requirements rather than duplicating them.
The dangers of non-compliance
Non-compliance is not a theoretical risk. Negative outcomes can include:
Regulatory investigations and audits.
Financial penalties and repayment obligations.
Reputational damage and loss of client trust.
Lost instructions and reduced competitiveness.
In extreme cases, being struck off or forced to close.
Compliance mistakes often develop gradually. Missed checks, poor record keeping or lack of oversight can accumulate until they become a serious issue.
Turning compliance into a managed process
Accurate pre-onboarding, onboarding and ongoing checks
Compliance starts with getting client pre-onboarding and onboarding right. Identity checks, anti-money laundering checks and conflict checks must be completed, recorded and stored correctly for every contact and every matter. These are not one-off actions but part of a continual compliance process to fulfil key Know Your Client (KYC) duties.
These checks ascertain contacts are who they say they are, they have legitimate funds to pay for your services, and there are no competing interests between prospective, existing and past clients.
Secure, compliant information storage
Law firms must understand what data they’re holding, why they’re holding it and how it’s protected. This includes sensitive identification documents and access credentials. Strong compliance means thinking carefully about where information is stored and how it’s shared, particularly when client portals or third-party platforms are involved to interact with clients at core matter phases in an online setting.
Using reporting to reduce risk
One of the most effective ways to manage compliance is through visibility. Being able to see at a glance whether engagement letters have been signed, checks completed or accounts reconciled allows law firms to identify and address risks early, rather than reacting after a problem arises. A proactive, not reactive, stance wins every time.
Technology as a compliance enabler
Modern legal software can significantly reduce the burden of compliance when it’s used optimally. Case management systems such as LEAP Legal Software gives law firms the ability to manage matters, money and compliance data within a single structure, feeding directly into reports that highlight risks and anomalies.
LEAP supports compliance with the SRA Accounts Rules by making it easier to identify issues such as incorrect postings between office and client accounts, helping law firms act when anomalies arise and before breaches escalate.
For anti-money laundering and identity checks, LEAP integrates with third-party solutions such as Infotrack, permitting clients to submit ID digitally using advanced verification technology. Checks run in the background, pulling information from the matter and returning results directly into the system, reducing duplication and manual handling.
Additional integrations, including tools connected via Zapier, for instance Microsoft Power BI, empower law firms to improve reporting and visibility across applications, creating a more joined-up approach to risk management.
How Jayva supports law firms with compliance
Jayva works with law firms as LEAP-certified consultants, helping practices use technology and embed processes to meet regulatory requirements with confidence. Our services include:
Consultancy and tailored training on LEAP and integrated toolkits.
System health checks focused on compliance and workflows.
Legal cashiering and SRA Accounts Rules best practice.
Compliance procedures, reporting and risk management support.
We understand what regulators expect, we know what good compliance looks like and we appreciate how quickly issues can appear if systems aren’t configured or used properly, and procedures aren’t defined or followed.
Final thoughts: compliance as protection, not burden
Compliance isn’t simply about meeting regulatory obligations. It’s about protecting your law firm, your clients, your money, your data and your reputation.
With the right systems, integrations, procedures and expert support in place, compliance becomes structured, visible and manageable. That assurance allows law firms to focus on delivering excellent legal services, knowing the foundations are secure.
To find out how Jayva can support your law firm through consultancy and training as LEAP’s certified consultants, please get in touch today.