Factsheet: new regulatory objective in the Legal Services Act 2007
Updated 26 October 2023
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Why is the government acting?
The Legal Services Act 2007 (LSA) sets out “regulatory objectives” that the regulators, the Office for Legal Complaints and the Legal Services Board are under a duty to observe when exercising their functions. These objectives include: protecting and promoting the public interest; supporting the constitutional principle of the rule of law; and promoting and maintaining adherence to the professional principles.
While it can be inferred that the regulators should ensure lawyers are not breaching the economic crime regime, this is not set out as an explicit duty in current legislation. As a result, frontline regulators may have different interpretations of the extent of their duties relating to economic crime, and unequal effectiveness in monitoring and enforcing compliance. Regulators can also face challenge to their compliance activity, making monitoring and enforcement costly.
The crisis in Ukraine has shone a light on the exposure of professional services sectors to economic crime. The legal services sector was assessed in HMT’s National Risk Assessment of money laundering and terrorist financing as at high risk of abuse for money laundering purposes. [footnote 1] The sector is exposed to further-reaching risks such as fraud or breaches of sanctions legislation. We need to ensure that legal services regulators have the powers they need in this space.
What is the government going to do?
The government is introducing a new regulatory objective to the Legal Services Act 2007 focusing on promoting the prevention and detection of economic crime.
This change will affirm the duties of regulators and the regulated communities to uphold the economic crime regime, and it will put beyond doubt that it is the frontline regulators’ duty to carry out such regulatory action, as is appropriate to uphold this objective. It will also enable the Legal Services Board, as the oversight regulator, to performance manage frontline regulators against this economic crime objective.
The intended effects are more effective enforcement action from legal services regulators, as well as reduced challenge of any type for regulators carrying out proportionate monitoring and enforcement activities to ensure economic crime compliance.
Who will this apply to?
The new regulatory objective must be promoted by the legal services regulators, the Office for Legal complaints and the Legal Services Board.
When will this come into effect?
Implementation will proceed following Royal Assent of the bill.