Without Prejudice
Issue 35


In this Issue
Incorporated Legal Practices Portal Project - Technology at the OLSC
Money Laundering


Incorporated Legal Practices Portal Project - Technology at the OLSC

Since July 1, NSW legal service providers have been permitted to incorporate and provide legal services to clients either alone, or alongside other service providers who may, or may not be, legal practitioners.

There are currently 745 incorporated legal practices (ILPs) operating in NSW, of which approximately 5 are incorporated multi-disciplinary practices (MDPs). There are currently two ILPs that have listed on the Australian Stock Exchange, with another currently making its initial public offer. New ILPs are being formed at a rate of approximately 15-20 per month.

By virtue of sections 140(3) and 670 of the Legal Profession Act 2004 (LPA), the Office of the Legal Services Commissioner (OLSC) has the role of auditing ILPs to determine compliance with the legislative obligations which apply. The test for compliance is found in part in s 140(3) of the LPA, which provides that a legal practitioner director must ensure that “appropriate management systems” are implemented and maintained by the ILP. A failure to do so is capable of being professional misconduct.

The LPA does not define “appropriate management systems”. Accordingly, the OLSC worked collaboratively with the Law Society of New South Wales, LawCover, the College of Law and other stakeholders to determine the objectives to be met to help ascertain whether an ILP has “appropriate management systems” in place. The approach formulated was an “education towards compliance” strategy which requires ILPs to demonstrate that they have procedures in place to ensure compliance with what the OLSC considers to be the ten key objectives of a sound legal practice. All ILPs are required to self-assess their management systems and rate their compliance with the following ten objectives in a Self-Assessment Document:

• Negligence – providing for competent work practices
• Communication – providing for effective, timely and courteous communication
• Delay – providing for timely review, delivery and follow up of legal service
• Liens/file transfers – providing for timely resolution of document/file transfers
• Cost disclosure/billing practices/ termination of retainer – providing for shared understanding and appropriate documentation on commencement and termination of retainer along with appropriate billing practices during the retainer
• Conflict of interests – providing for timely identification and resolution of “conflict of interests”, including when acting for both parties or acting against previous clients as well as potential conflicts which may arise in relationships with debt collectors and mercantile agencies, or conducting another business, referral fees and commissions etc
• Records management – minimising the likelihood of loss or destruction of correspondence and documents through appropriate document retention, filing, archiving etc and providing for compliance with requirements regarding registers of files, safe custody, financial interests
• Undertakings – providing for undertakings to be given, monitoring of compliance and timely compliance with notices, orders, rulings, directions or other requirements of regulatory authorities such as the OLSC, courts and costs assessors
• Supervision of practice and staff – providing for compliance with statutory obligations covering licence and practising certificate conditions, employment of persons and providing for proper quality assurance of work outputs and performance of legal, paralegal and non-legal staff involved in the delivery of legal services
• Trust account regulations – providing for compliance with Section 253 of the LPA and proper accounting procedures.

• Enable the electronic submission of administrative and regulatory information by ILPs to the OLSC;
• Track the life cycle of an ILP by collating and indexing data in a searchable database;
• Allow the viewing, completion and submission of the self-assessment form and any supporting documentation online by an ILP;
• Automate the self-assessment process including validation of information submitted by ILPs;
• Enable the generation of standard and customised correspondence;
• Automate the tracking of the annual self-assessment process;
• Provide standard and customised reports for the OLSC and online distribution to other approved external parties such as ILPs, ASIC and the Law Society;
• Provide tracking of the assessment process electronically, including generating email alerts in the self-assessment process to improve monitoring of the process by both Legal Practitioner Directors and OLSC staff;
• Provide profiling to assist in the identification of suitable targets for information dissemination or audit by the OLSC;
• Enable the statistical analysis of ILP data using OLAP tools.
• Provide customisations of and alternate paths through the self-assessment and display different types of information that is relevant to ILP profiles;
• Enable electronic distribution of regulatory and educational information by the OLSC to ILPs and other interested parties via a web based portal; and
• Facilitate the adoption of good business practices and appropriate management systems through analysis of data submitted by ILPs.

• Undertaking a money laundering and terrorism financing risk assessment on their existing business functions;
• Developing and implementing compliance programs and ensuring that all staff are trained;
• Developing and implementing systems to identify high-risk customers and monitoring those customers to report suspicious transactions;
• Ensuring all staff are aware of what a “suspicious matter reporting obligation” is and how not to breach the tipping-off rules;
• Establishing systems and processes for collecting and retaining both identification and transaction related records;
• Providing their business details are recorded on a register of “providers of designated remittance services” that is maintained by AUSTRAC.