CQS Assessments – How to Prepare
Last month we had the pleasure of having Tracy Thompson host one of our webinars. As a lead assessor for CQS and a Lexcel consultant, Tracy’s insight and expertise is incredibly valuable for all in the conveyancing industry.
Tracy covers a lot in this webinar including the expectations of the CQS assessment, how the new CPMS differs from the previous one and how, now just over a year on firms can get themselves prepared for accreditation.
This article serves as an overview of the insights Tracy imparted and you can watch the whole webinar here.
Notification and Schedule
Firms will receive notification of an inspection via email from the Law Society. The senior responsible officer (SRO) should regularly monitor these emails and expect a notice by post. The inspection schedule will include three proposed dates, and firms are required to communicate their preferred date. The Law Society must provide a minimum of four weeks’ notice before the assessment.
Key Documents and Assessment Process
Within two weeks of receiving the notification, firms must provide several key documents, including Anti Money Laundering policies, SDLT (Stamp Duty Land Tax) reports, reports to lenders, anti-bribery policies, and property mortgage fraud policies.
During the assessment, the assessor will conduct a full-day review, which includes an opening meeting, policy and procedure review (based on the Core Practice Management Standard), central records review, review of open and closed files, and interviews with selected personnel.
Potential Assessment Outcomes
It is rare for a firm to demonstrate full compliance with CQS requirements. Non-compliances are common due to the complex nature of human interactions and processes. Assessment outcomes are categorised as:
- Major non-compliance – firms have three months to address these issues
- Minor non-compliance – firms have 21 days to address these issue with corrective action
Corrective actions may include updating documentation, implementing new procedures, and providing evidence of compliance.
Understanding the Core Practice Management Standard
The Core Practice Management Standard, effective from May 2022, consists of seven sections with 40 individual requirements. Many of these requirements overlap with Lexcel version 6.1, including the addition of People Management.
The standard sets minimum expectations without being overly prescriptive. Firms have the flexibility to determine their procedures and allocate roles based on risk assessment and record-keeping requirements.
Understanding specific terms in the CQS updated standard is crucial. Procedures are written descriptions of activity steps, and compliance can only be confirmed if the documented procedures are effectively followed.
“Must” denotes mandatory requirements, while “should” indicates optional requirements that must be documented and justified logically.
Tips for Demonstrating Compliance
To demonstrate compliance during an assessment, firms should ensure that their documented policies and procedures align with their actual practices.
Providing evidence and recording activities related to procedures is essential. Clear documentation serves as a defence during inspections, as verbal explanations without supporting evidence are insufficient.
Some tips from Tracy to takeaway when thinking about your demonstrating compliance:
- Say as you do – documented policies and procedures
- Do as you say – ensure policies are being followed as misalignment in procedure would mean you are breach of your own policy
- Provide evidence – make sure everybody knows how the standard is complied with
These can help you identify holes, training needs and where your corrective actions may need the most focus. Providing evidence and record activities around your procedures, ‘Ah but we would’ve done that’ is not a defence.
Insights into CQS On-Site Assessments
CQS on-site assessments began in May 2022 and are still being refined. The assessments cover various types of law practices and common areas of non-compliance have emerged.
These include inadequate BCP (Business Continuity Plan) testing, weak financial verification procedures, lack of documentation, challenges in dealing with leasehold procedures and insufficient reporting to lenders. One of the key highlighted points was surrounding step three of the Conveyancing Protocol, which requires solicitors acting for the seller to:
“Obtain instructions for dealing with remittance of gross/net sale proceeds and details provided by the seller of UK bank accounts for remittance of proceeds.
“Obtain evidence that the bank account is properly constituted as an account conducted by the seller for a period of at least 12 months.
How could this be an issue? In the current cost of living crisis, banks are vying for business and it is conceivable that some clients might have moved their accounts to a new bank. Tracy commented how practices need to take a risk-based approach to this. A way to do this is to ensure that the bank account is properly constituted and that the evidence is substantive and not just screenshots. This is an area that CQS are hot on and as time goes on this should be an area where efficient improvements are made.
In response to this need, Armalytix has updated the tech around its bank account verification tool. A firm can now see what activity there is on an account over 12 months old and allow clients to explain why an account might only be 6 months old.
The Role of Armalytix
Armalytix assists in meeting CQS requirements, particularly in areas like Source of Funds and Source of Wealth evidence. The three-stage approach for this includes a customisable Fact Find process, connecting directly to banks for transaction details and a Source of Funds questionnaire endorsed by Legal Eye. Armalytix helps streamline evidence-based documentation collection and improve compliance.
Preparing for a CQS inspection requires a thorough understanding of the scheme’s requirements and an alignment of documented procedures with actual practices.
Firms should conduct internal reviews, document policies accurately, and provide evidence of compliance. By focusing on areas of non-compliance, such as BCP testing, financial verification, documentation, and leasehold procedures, firms can strengthen their practices and successfully navigate CQS assessments.
Tools like Armalytix can assist in meeting specific CQS requirements, improving efficiency, and ensuring compliance, by providing firms with comprehensive Source of Funds and Source of Wealth evidence.
Book a demo to find out more.