What is the point of CQS??

Results of a recent Legal Futures investigation have raised concerns about the efficacy of the Conveyancing Quality Scheme (CQS) accreditation for law firms, particularly in relation to anti-money laundering (AML) compliance.

The article highlights the high percentage of firms that have been fined for AML breaches that also have CQS accreditation (a shocking 70%), raising awkward questions about the enforcement of CQS rules. Just under 10% of those fined also had Lexcel accreditation. Both standards have detailed explicit requirements for AML compliance.

So what does this tell us?

An inevitable conclusion is that many firms do not take CQS seriously

I generally avoid offering personal views on social media, but I have to confess that this makes me vicariously angry for those who respect the rules.  I’m increasingly frustrated by firms that choose to disregard the principles of the Conveyancing Quality Scheme, while others work diligently to uphold its standards. Their non-compliance undermines the credibility of the entire scheme and casts a shadow over those who adhere to it with integrity.

At Enderley, we have supported many law firms in achieving and maintaining CQS compliance since 2011, just after the scheme started. These firms have taken CQS compliance extremely seriously, and we have helped them put robust plans, policies and procedures in place to comply with the CQS Core Practice Management Standards (‘CPMS’). Most of these firms have continued to work with us over the years to ensure that they comply, not just with the latest CQS CPMS, but also with the Money Laundering Regulations 2017 and all other relevant requirements.  

Clearly however their huge efforts to comply, and their reputations, are being undermined by those who do not take CQS compliance seriously. They are being tarred with the same brush as firms that have coasted at best, and been disingenuous at worst. As a result of these high-profile failures CQS accreditation has been seriously devalued in the eyes of lenders, insurers, and the public.

It therefore comes as no surprise to read that many CQS accredited firms do not have compliant policies and procedures, let alone implement them. We’re sometimes asked to put CPMS-compliant documents in place several years after a firm was awarded the CQS accreditation. The reality is that the CQS Senior Reporting Officer must have signed off on a CQS application, and subsequent re-accreditation applications, knowing that statements confirming compliant written policies and procedures were misleading at best, untrue at worst.

Can CQS be rescued?

It seems that the only hope is more rigorous enforcement by The Law Society. They claim to review accreditation standards continuously and the CQS Office emphasises the importance of annual assessments for compliance. But critics argue (fairly, in my opinion) that the CQS rules are seldom enforced, with the impression given that the scheme may serve more as a revenue source for The Law Society than as a serious (although voluntary) compliance regime. 

In the very early days of CQS, applicants had to submit their compliant policies and procedures as part of their CQS application. That didn’t last long however; probably because it took too long to review and the CQS Office was under-resourced from the start. In the last two years, as part of the move to an online application process, The Law Society has simplified the CQS application form. The form is considerably shorter and (in my opinion) less rigorous that its predecessor. This has accelerated the accreditation process enormously from a typical 8+ weeks to just 10 days. But at what cost?

In the first few years of CQS The Law Society did carry out random desktop reviews. I remember one frantic call from a CQS-accredited firm that was required to send their written CPMS documentation to the CQS Office within 7 days. The firm had nothing in place and was terrified of losing its accreditation – and, critically, membership of lenders’ panels. We also worked with a firm that had lost its CQS accreditation because of inadequate CPMS documentation: we helped them put appropriate documentation in place with advice on implementing the new procedures. We successfully appealed for the restoration of their accreditation.

In recent years however none of our CQS-accredited clients has been subject to a desktop review, still less an on-site audit, despite The Law Society’s proclaimed intention to roll out these measures. Unless these are introduced, and soon, there is a significant risk that CQS will devalue, and even become worthless. Also, to confirm representations made about compliant CPMS documentation, surely the CQS Office should require to see (at least) a random sample of policies and procedures during the application process?

So, is it still worth applying for CQS accreditation?

Yes, absolutely! Most lenders and panel administrators still require CQS for panel membership. Also, applied properly, the CQS Core Practice Management Standards provide an excellent framework for an effective operational risk management system. But it’s critical that everyone in the firm buys into the requirements and recognises the importance of compliance. The 2022 CPMS expanded the scope of the standard, and in many ways CQS is now more exacting (although less holistic) than Lexcel. For those firms that fully embrace CQS (and/or Lexcel) and embed the policies and procedures into their firm’s culture, the process is transformative. Comply with CQS/Lexcel AML requirements and you should have nothing to fear from an SRA audit.