In a recent episode of the “Inside Risk & Compliance” podcast, hosted by Adam Spencer of AJ Fox Compliance, I had the pleasure of delving into the intricacies of law firm risk and compliance, discussing everything from outcome-focused regulation to (my passion) Alternative Business Structures (ABSs). The 30-minute conversation covered a lot of ground, including:
Transitioning to Outcome-Focused Regulation
From the podcast: “Outcome-focused regulation turned everything on its head. It said, ‘it’s up to you to decide what compliance looks like—we’ll give you the broad framework, but how you get there is up to you.’”
One of the main topics we covered was the significant shift in the legal sector from rule-based compliance to outcome-focused regulation. This change has fundamentally altered how law firms manage compliance, moving away from strict adherence to a rulebook to a more principle-based approach. This transition, while offering greater flexibility, has introduced challenges in interpretation and implementation.
The Role and Challenges of Compliance Officers
From the podcast: “You are the regulator’s eyes and ears within your firm. You are the internal police, and that’s a huge change for someone within a law firm who previously might have been a manager but certainly didn’t carry that personal responsibility for compliance.”
We also touched on the evolving role of Compliance Officers (COLPs and COFAs) within law firms. Initially thrust into these roles amidst the regulatory upheavals of 2007-2012, many found themselves navigating uncharted waters, bearing significant personal responsibility without a clear precedent to follow.
The Emergence and Impact of ABSs
From the podcast: “I love ABSs; they bring fresh thinking and new ideas to legal services. It’s exciting to be at the beginning of that journey, helping structure and guide firms through their initial growth phases.”
Another significant portion of our discussion was dedicated to ABSs, which allow for non-lawyer ownership and management within law firms. We explored how this model has injected fresh perspectives and innovative approaches into the legal services sector, often driven by entrepreneurial spirit.
Continuous Learning and Adaptation in Compliance
From the podcast: “I’m a big believer in ‘fake it till you make it.’ There was a lot of self-directed learning involved. Attending everything I could, speaking to whoever would talk to me, reading all the books, and starting to write were all crucial steps in my journey.”
Our conversation highlighted the importance of continuous learning and adaptation for those wanting to get into risk and compliance roles. With regulations and guidance frequently evolving, staying informed and adaptable is crucial.
Looking Ahead: Challenges and Opportunities
From the podcast: “Compliance is as critical as any other part of a law firm. It’s about enabling the business to do what it wants in a safe way that won’t attract regulatory attention or cause reputational damage.”
Looking forward, we discussed the increasing challenges surrounding anti-money laundering (AML) compliance and the importance of culture as a regulatory consideration. Compliance should be embraced as an enabling force in law firms rather than a restrictive one.
