By Robert Blech, a professional practices partner at Legal Futures Associate MHA
Every law firm is required to have a Compliance Officer for Finance and Administration (COFA). The COFA plays an important part in ensuring accountability and adherence to the SRA Accounts Rules as well as more widely on the controls required over the financial procedures of a law firm.
The problem is as every law firm must have a COFA, and practices vary from sole practitioners to large corporate entities, the quality of COFA’s and the resources available to them varies immensely. This can often mean that COFA’s do not fully understand their responsibilities and the obligations imposed upon them. It is similar to every driver being required to hold a driving licence but not knowing all the Highway Code. Worse than this is knowing the Highway Code but choosing not to adhere to it due to time pressures or a belief that by breaking it, you will not get caught.
In order to be a COFA, you must: –
- Be a manager or employee of the law firm.
- Consent to the role you are undertaking
- Be of sufficient seniority and responsibility to fulfil your obligations
Unlike the COLP (Compliance Officer for Legal Practice), a COFA does not need to be a solicitor allowing firms to appoint individuals with strong financial backgrounds such as accountants or bookkeepers.
The COFA’s duties revolve around financial compliance and risk management. Their key responsibilities include:
- Ensuring your firm, its managers and employees comply with any obligations imposed upon them under the SRA Accounts Rules
- Informing the SRA promptly of any facts or matters you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of the SRA Accounts Rules has occurred or otherwise exercise its regulatory powers (SRA Code for Firms (paragraph 9.2))
The COFA is essentially a support for the financial risk management of the firm and so should have a good understanding of the SRA Accounts Rules and of business compliance in general. They should oversee the processes the firm has to ensure they are suitable on a risk-based assessment.
A COFA therefore should implement and oversee systems for compliance in relation to the SRA Accounts Rules and ensure that only the appropriate people authorise payments from the client account. The COFA should implement a system for monitoring, reviewing and managing risks and ensure that issues of conduct are given appropriate weight in decisions the practice takes, whether on client matters or practice-based issues such as funding. The COFA should also make arrangements to ensure that any duties to clients and others are fully met even when staff are absent.
The COFA is more than just a financial overseer—they are a guardian of integrity within the legal profession. By ensuring that law firms handle client money responsibly and transparently, COFA’s help maintain public trust and uphold the standards that define ethical legal practice.
Whilst COFA’s will not be used as “sacrificial lambs”, it is important that they are not negligent in their actions. They may face regulatory action personally, if they are deemed to have not undertaken their role sufficiently and so it is important that enough time is given to the role as well as ensuring proper training.
If you’re considering becoming a COFA ensure you understand its full obligations. If you sign off the client bank reconciliations, ensure these are reviewed and any issues challenged and corrected promptly. Self-reporting is another area where we have seen COFA’s failing to appreciate the seriousness of their role. Remember ignorance is no excuse.
