The SRA have issued the following press release
The draft Strategy builds on work conducted by the SRA over the past two years which has focused on the risks posed by a small number of firms engaged in property-related fraud and money laundering. The draft Strategy will be further developed over the course of the year by work undertaken through the SRA’s new approach to supervision, delivered through the supervision pilot.(1)
Conveyancing accounts for a high proportion of claims on both Professional Indemnity Insurance (PII) and the Compensation Fund. It is also the subject of an unacceptable volume of complaints against the profession. Claims are arising from poor quality conveyancing but primarily from fraud and dishonesty — either directly on the part of a limited number of firms or as a result of firms’ risk management and compliance systems being weak and allowing those firms to become involved in dishonest transactions.
The SRA has published a separate Policy Statement on reforms to the compulsory PII arrangements designed to put the system on a long-term sustainable footing. In addition, the SRA will be undertaking a major thematic review of the regulation of conveyancing and the holding of client money during 2011. The objective of this review will be to identify mechanisms, both in the way the SRA regulates this area of business and the way firms manage compliance and risk, so as to reduce the causes of complaint and loss by clients leading to PII and Compensation Fund claims.
The draft Strategy forms a part of this overall package of measures designed to address the problems arising in this area.
Samantha Barrass, the SRA’s Executive Director, Supervision, Risk and Standards commented: "There has been a substantial increase in payments made by PII and the Compensation Fund in the last few years as a result of poor quality and dishonesty in conveyancing transactions. We have seen a direct correlation between the downturn in the economy and the housing market and the increase in claims. These statistics highlight the need for us to continue to target our regulatory resources on conveyancing — both to assist firms in managing their own risks and compliance and to identify and prevent dishonest behaviour within a small number of firms.”
Samantha explained: "Our aim is primarily to ensure that firms take seriously the risks in this area and establish good compliance and risk management systems so as to demonstrate an effective degree of internal control. Where we identify firms where this is not the case we will, in the first instance, work with them to enable them to put matters right themselves. Only if that approach fails, or we identify serious breaches that are putting clients at immediate risk, would we move towards enforcement action.
"Whilst this is not a formal consultation, we are keen to enter into a dialogue with firms and will be paying particular attention to the equality impact of our proposals."