New practice rules intended to raise standards around anti-money laundering practices and incidental financial business were approved by Scottish solicitors at a special general meeting of the Law Society of Scotland yesterday evening.
The incidental financial business (IFB) regime allows firms to conduct certain activities which would otherwise require Financial Conduct Authority (FCA) authorisation. The approved changes to the rules, the first in over a decade, are required to ensure that the Society implements the terms of the Insurance Distribution Directive by the required date of 23 February 2018.
Vice President Alison Atack told the meeting that the amending rules had been the subject of lengthy and technical discussions with the FCA, and paid tribute to those who had undertaken them for the Society. Many of the required protections were already in place under existing practice rules and controls.
The purpose of the directive and the amended IFB rules is to raise the standards of conduct of business and introduce greater disclosure requirements in relation to the distribution of insurance products.
The anti-money laundering (AML) practice rules come in the wake of new regulations introduced last June. They affect how the Society will supervise compliance, the key difference being the introduction of desk-based risk assessment and reviews, which in some cases may lead to an onsite AML audit of firms by the Society.
Ms Atack, who is also convener of the Society's Client Protection Committee, commented afterwards: "We take our regulatory role very seriously and it is imperative that we have a robust set of practice rules, which provide clarity for the profession and the appropriate and necessary protections for solicitors’ clients.
"I am pleased that our membership has endorsed the proposed amendments. We will now seek formal approval from the Lord President’s office and work towards their implementation. We will of course keep our members up to date as matters progress."
Consultations have already taken place with the Society's members, the Lord President’s Office and the Financial Conduct Authority (FCA) on the IFB rules. The Society will seek the Lord President’s formal approval on the AML rules once a supporting legislative change process has been concluded and before implementation.
The Society will also develop and issue guidance relating to both rule changes and keep members informed of progress.