It’s indisputable that law firm regulatory compliance processes can be complex and take time and money to implement—but the cost of non-compliance can go far beyond just dollars and cents.
From failing to consider data privacy and trust accounting to human error with data, foregoing ethics and compliance duties can open your firm up to risks like censure, client dissatisfaction, and costly PR damage.
What does compliance mean for law firms?
Compliance is a big issue in the legal industry and for good reason. But compliance is complex, and it’s not a monolith; there are numerous areas in which attorneys and their law firms need to be compliant. These can be broken down into the following areas:
- Ethical compliance risks: these risks arise when a law firm fails to comply with ethical standards set by professional organizations, such as bar associations. These risks could include marketing violations, conflict of interest, and more.
- Data privacy and security risks: law firms are privy to lots of sensitive client information. Failure to secure it properly could result in data privacy and security compliance risks.
- Financial compliance risks: law firms must comply with financial regulations related to issues like trust accounting to avoid financial compliance risks.
How does non-compliance affect law firms?
Lawyers sometimes make the mistake of assuming that compliance violations just involve a proverbial slap on the wrist or a sternly worded letter, but the reality is that consequences for non-compliance can be severe and lasting.
Attorneys who fail to meet compliance requirements—whether ethical, security, or financial—can be handed financial penalties, experience reputational damage, and face legal action. They may even face disbarment in some cases.
Attorneys that face compliance violations don’t exist in a vacuum either. Unless an attorney works at a truly solo practice, their firm or business partners may also be impacted. This impact may be experienced as:
- Lost time and resources handling compliance violations
- Disrupted and delayed client work
- Potential recruitment and retention challenges
- Lost revenue
How law firms can reduce compliance risks
Compliance is complex, and ensuring your practice meets standards takes time and effort. Attorneys should be informed about legal industry compliance requirements, and law firms should devote sufficient resources to creating a workplace environment that supports compliance at all levels.
But one step law firms can take today to reduce the risk of compliance violations is to use the right software solutions to run their practice.
When you use legal-specific practice management software to handle your operational processes, your firm has a better chance of avoiding any potential pitfalls and staying compliant without much extra effort. Here are some of the many ways that the right software solution can benefit your legal practice.
Invest in software with built-in trust accounting
Trust accounting is one of the most critical aspects of law firm operations, and mishandling them can lead to severe consequences.
Client trust accounts are strictly regulated to ensure that all funds are handled appropriately, and staying in compliance with these rules can be a time-consuming process for many legal professionals.
An excellent practice management solution will provide you with comprehensive trust accounting features like three-way reconciliation, automated transaction recording, and compliant trust fund management.
Make sure that the solution you choose will allow you to:
- Make online payments for individual or bulk invoices using trust funds
- Manage individual client ledgers
- Print disbursement checks
- Import electronic bank statements and auto-reconcile your books
- Prevent mistakes like commingling or ledger overdrafts
- Track and disburse third-party lien claims
- Generate comprehensive trust recordkeeping reports
Keep client data secure with the right client collaboration tools
Another essential aspect of keeping your firm compliant is ensuring that confidential client information is kept secure.
Using the right client collaboration tools can help you maintain the security of sensitive data, make things more convenient for your clients, and reduce the amount of time your team spends on non-billable tasks so that they can focus on high-value work. Important features to look for include:
- Secure client portals that enable you to share confidential information with clients and keep sensitive data protected, minimizing the risk of unauthorized access or data breaches
- One-click eSignatures that use bank-level encryption and knowledge-based authentication (KBA) for secure authorization
- Secure payment processing that allows clients to pay any time online through their client portal, which guards sensitive client information and increases convenience
Ensure document management meets industry standards
If your firm is using paper files or industry-agnostic document management systems, you could end up losing documentation that’s critical for your compliance processes or, worse, having that information fall into the hands of cybercriminals.
A surefire way to avoid dealing with missing files and reduce the chance of data breaches is to use a legal-specific practice management platform that provides you with secure document management solutions.
Document management software can help your firm by reducing the time it takes to locate client files or information. With the right software, all the information your team needs can be retrieved with the click of a button.
Here are some of the features you can benefit from in document top-notch management solutions:
- Cloud-based access allows you to locate and easily retrieve any of your files from any device with an internet connection at any time
- Original document templates make it easier to create documents for client matters instead of wasting billable hours creating multiple documents from scratch
- Advanced security enables you to set privileges for who is able to view specific documents making sure that only the right eyes view sensitive data
- Bank-grade encryption ensures valuable client data is protected when you’re sending it from your computer to the cloud and when it’s at rest in storage
With CosmoLex, staying compliant has never been easier
Don’t let complicated compliance regulations and time-consuming manual processes create undue stress for you and your team. Instead, take advantage of a legal-specific practice management solution that automates the tough stuff, so you can get back to the business of running your law firm.
From cloud-based storage with bank-level security to keep your documents safe to calendars and automated workflows that keep your team on task and on time with filing deadlines, CosmoLex has features that empower firms to stay compliant and increase efficiency and productivity.