Starting April 2025, new UK stamp duty thresholds will come into effect, reducing the limit for first-time buyers to £300,000 and for other homebuyers to £125,000. This means higher costs for many buyers and challenges for firms who must remain the right side of compliance during this busy period.
My Key Takeaways
- The upcoming decrease in stamp duty thresholds is of course going to impact buyers to get their purchase completed by the beginning of April. However, the urgency then falls to the law firms to decide if they cut corners or not. Not is the obvious answer, however much you are being pushed by the sellers’ agents or other side, your firm’s compliance should be your priority and all your powers surrounding money laundering activity and ongoing monitoring must be on point.
- Also, the increased market activity will no doubt and unfortunately lead to a rise in property transaction failures, placing pressure on law firms and estate agents. Have you been asked to hold client monies “just in case”? Suspicious activity alert!
- Law firms should prioritise enhanced due diligence, keep on top of AML compliance regular training, and use your technology to effectively manage risks and maintain compliance. Think of the SRA as Big Brother to keep your law firm business on its toes.
The Budget and Stamp Duty
The recent budget announcement by Rachel Reeves has activated a surge of activity in the property market. Starting on April 1, 2025, there’s going to be a reduction in the stamp duty threshold to £300,000 for first-time buyers from its current level of £425,000 and to £125,000 for other purchasers down from £250,000. As this substantial alteration is set to increase stamp duty expenses for numerous purchasers, there’s an urgent push to finalise transactions before these new rates take effect.
I’ve been there and worked with conveyancers when times have been hard and by that I mean, the market isn’t moving or too much work and not enough hands on deck to help with the workload. From my perspective now, I’m always reminding my client firms to look at the risk based approach.
It’s critical that your law firm not only performs its duties with efficiency, but also adheres strictly to all relevant legal standards and regulatory mandates. You’ll hear me bang my drum loudly, compliance transcends mere procedural formalities, the baddies swoop in when they see easy prey. When we are overstretched we can fall foul to financial criminals. It’s that simple.
Law firm compliance plays a key role in preserving your firm’s good standing while circumventing harsh penalties (monetary and reputation!). I know many of you reading this will be head down and chasing your tail, either by simply being a small legal firm that’s regulated by the SRA or managing employees on leave, working part-time, on holiday, off sick, etc. In all these cases, you essentially have to remain hyper vigilant.
What happens if the property chains collapse?
As new stamp duty thresholds are set to take effect, there is an anticipated surge in the push to finalise property completions. This urgency will no doubt lead to a higher incidence of incomplete transactions. Approximately 84,079 transaction failures were recorded in Q3 of 2024, marking the most since 2022. With market activities intensifying due to Stamp Duty deadlines, it’s likely that we’ll see an upswing in such lapses over the next few months.
Collapsed chains are emotionally draining for everyone involved. It’s a time when we develop thick skins and drink more coffee (or my drink of choice, Diet Coke). It’s not only inconvenient for those buying and selling, but overall financial losses creep in as firms attempt remedial actions after collapses.
What would you do if a client wants you to keep hold of their money in their client account (waiting for another purchase)? Are you water tight with your knowledge of Accounts Rules?
Stay calm
During periods of high stress and increased workload, mistakes are more likely to occur. For law firms operating with limited resources, it’s so important to manage risk meticulously. If you’ve got a cavalier attitude towards taking shortcuts due to pressure you could find yourself in a whole heap of trouble.
Overlooked potential risks may not go unnoticed by auditors and insurance companies, even if they escape the scrutiny of the Solicitors Regulation Authority (SRA).
Financial criminals tend to exploit us when we are overstretched in this current property market by:
- Applying pressure: Pushing for quick completions to bypass thorough due diligence.
- Providing complex transactions: Overwhelming conveyancers with complicated structures to obscure the source of funds.
- Exploiting trust: Taking advantage of busy conveyancers who might rely on client assurances without proper verification.
Here’s my one-month to-do list to help conveyancers stay AML compliant, even when under pressure:
Week 1: Knowledge & Systems Check
- Review AML Regulations: Refresh knowledge of the latest AML regulations and guidance from the SRA and HMRC.
- Assess Current Processes: Analyse your firm’s current AML procedures for any gaps or weaknesses.
- Technology Upgrade: Explore using AML software to automate checks and streamline processes.
- Internal Training: Conduct a refresher session for all staff on AML compliance, emphasising red flags and reporting procedures.
Week 2: Client Due Diligence Focus
- Enhanced Due Diligence: Implement stricter checks for high-risk clients or transactions (e.g., politically exposed persons, cash buyers, unusual transaction structures).
- Source of Funds: Scrutinise the source of funds, even if it seems straightforward. Obtain clear evidence and documentation.
- Independent Verification: Don’t solely rely on client-provided information. Use independent sources to verify identities and addresses.
- Document Everything: Maintain detailed records of all client interactions, due diligence checks, and risk assessments.
Week 3: Communication & Collaboration
- Client Communication: Clearly explain the AML process to clients upfront and set expectations for providing information promptly.
- Colleague Collaboration: Encourage open communication among your team members to identify potential red flags and share concerns.
- Reporting Officer: Establish a clear reporting line to the firm’s Money Laundering Reporting Officer (MLRO) for any suspicious activity.
Week 4: Ongoing Monitoring & Review
- Transaction Monitoring: Implement systems to monitor transactions for unusual patterns or activities.
- Regular Reviews: Conduct periodic reviews of client files and risk assessments to ensure ongoing compliance.
- Stay Updated: Keep on top of any changes in AML regulations or emerging money laundering trends.
If you or someone in your practice is genuinely struggling with stress, anxiety and depression then LAWCARE is a confidential, non-judgemental safe space to open up in. All their volunteers on the helplines either work in law or have worked in law. They will get what you’re going through.
My Summary
There are conveyancing law firms and departments filled with employee headaches right now. If you work in a law firm as a conveyancer, or their COLP and/or MLRO, you simply have to navigate this period with a strong focus on compliance and risk management.
If your circumstances are exactly what’s happening in this blog, then please focus on your client’s (new or existing) source of funds and wealth and conduct your enhanced due diligence. Continue to provide training to your team or get more yourself, leverage your firm’s technology, maintain clear and open communication with your colleagues, stay on top of your internal audits, and take the time to stay informed.
I know it’s easier said than done, but it’s essential to remember the importance of staying calm when there simply don’t seem to be enough hands. With a proactive approach however, you and your colleagues will be able to navigate the challenges of this pre April busy period, and if you can get through this month and the fallout from broken chains, then you will definitely be more resilient for future spanners in the work!
You are not alone.
Amy Bell is CEO of Teal Compliance
