Riding the waves of change

Following several turbulent years in which practitioners had to adapt to new issues of compliance, from virtual document signing and witnessing to global sanctions, the international regulatory agenda continued to evolve over 2023.

The pace of change is unlikely to slow in 2024. This year will see the implementation of established frameworks, whether those are in individual jurisdictions or globally recognised standards set by bodies such as the OECD. The Financial Action Task Force has reported that many countries need to bring their compliance up to par when regulating virtual asset service providers, and the OECD will be focusing on enhanced transparency in the area of legal and beneficial ownership of real estate.

Issue 6 of the 2023 STEP Journal gave a detailed round-up of recent regulatory change. The question now is what this change means for STEP members and practitioners more widely.[1]

The consequence for practitioners, of course, is that they must navigate their everyday caseloads as well as meet all their compliance obligations. On top of this, they must communicate to their clients the requirements that must be met in terms of reporting and the potential consequences in terms of public transparency.

‘Keeping abreast of frequently changing requirements alongside day-to-day client work can be challenging for practitioners,’ comments Matthew Gilligan TEP, Deputy Chair of STEP Guernsey and Associate Director at STEP Platinum Employee Partner Saffery Trust Guernsey. ‘It is essential that these regulations are at the forefront of every thought process, decision and action taken.’

He notes that service providers have an ‘imperative role to play’ in supporting their employees. Internally, this involves putting in place robust anti-money laundering (AML) and vigilance policies and procedures. Externally, it is vital that companies and their employees are remaining in touch with ongoing changes in legislation by attending lectures and seminars and engaging in continued personal development.

Managing expectations

Companies may be striving to put in place adequate due-diligence measures to ensure their employees are meeting jurisdictional and global requirements; however, they cannot necessarily account for the external ramifications.

‘Most practitioners would agree that dealing with regulatory requirements is now just a fact of professional life and although it can be time consuming, it is inevitable,’ says Keith Robinson TEP, STEP Journal Editorial Board member and Partner at STEP Platinum Employee Partner Carey Olsen. ‘On the other hand, advising clients on these issues has now also become a significant part of private client practice.’

Explaining to clients what transparency and regulatory measures they must now adhere to can be both time-consuming and complex, and an exercise in managing expectations. Practitioners are now meeting with clients who are questioning why certain document wording, account reporting or additional beneficial ownership personal information is now needed, when a decade ago this was not a requirement.

Lisa Barca TEP,[2] Young Practitioner of the Year at the STEP Private Client Awards 2022/23, observes that clients are now generally very attuned to risk and experience it in all aspects of their everyday lives. However, she adds that ‘although they may understand the reason for regulatory requirements, they are not always good at understanding why such measures ought to be applied to their particular matter’.

Achieving best practice in managing these conversations is, then, a fine balance of setting out timelines and maintaining clear communication with each client. In achieving this balance, the landscape of regulatory red tape may be more easily navigated.

‘The key is effective and frequent communication and articulation of “how” and “why”,’ says Gilligan. ‘It is much easier to convey to a client a change in legislation if you have built a strong relationship with them. There can be a tendency for some practitioners to state “my compliance department has requested…”, which may be perceived by the client as the practitioner not being on board with the change. It is important to instead say “we require the following…” and explain to the client why this change has come about.’

FaceTime or face-to-face time?

Keeping practitioners up-to-speed with changes and keeping clients educated on their requirements and adequately supported would, for most companies, be testing enough. However, an already complex world has become far more challenging with the continued fallout from the COVID-19 pandemic.

With fewer AML measures and less reporting historically, the now-older generation in the workforce has had less exposure to this sort of work and must now adapt rapidly. Younger practitioners, on the other hand, have never known client administration without consideration of AML measures, risk and compliance. In particular, younger practitioners are finding regulatory requirements a double-edged sword. On the one hand, matters of compliance are evolving at such a pace that the younger workforce could be seen to have a learning advantage. ‘These issues aren’t “new” to young practitioners in the way that they are to people who have been practising for many years,’ explains Robinson. ‘In many ways, they are more responsive to the changes.’

However, the younger workforce has, in recent years, lost out on a key area of learning and development: the ‘soft’ and interpersonal skills element. Post-COVID-19 hybrid working trends for law firms worldwide were examined by Thomson Reuters Institute’s 2023 State of the Corporate Law Department report.[3] The report noted that ‘most corporate law departments globally have settled on some form of hybrid work arrangements for their staff’.

‘Post-COVID, I am unsure whether younger practitioners understand the loss of learning from being on the ground,’ says Barca. ‘I have gained so much legal knowledge by listening to my supervisors speak on the phone and meet with clients, and I have gained interpersonal skills by observation of my peers. Senior practitioners, too, have a duty to be present and mentor junior staff. By being present and making an effort to work with the junior staff, juniors are given the opportunity to refine their skills.’

Gilligan agrees that current hybrid working structures may hinder the progress of learning and sharing expertise: ‘Young practitioners learn from those around them and from the variety of people, thought processes and work ethics. Being in the office allows them to see first-hand how experienced practitioners deal with many different or difficult situations that we all have to deal with at certain times.’

A compliant future

The current geopolitical issues around the world are likely to result in further requirements for enhanced due-diligence on an ever-wider circle of clients as 2024 progresses. Businesses could prepare for this now by building up their risk and compliance departments to counteract this growing demand for more global reporting and monitoring, says Gilligan.

Workplace support for all age groups of practitioners will be needed and can take many forms: from ensuring appropriate work-life balance as their additional duties increase to facilitating learning and development courses and qualifications centring on global AML measures, international tax and compliance.[4]

Finally, a recognition of shared learning and the importance of mentoring will be vital.[5] Regardless of age or working patterns, practitioners will surely benefit from opportunities for the different generations in the workforce to come together and learn from each other’s experiences in a constantly evolving and complex world.