Do you include an AML paragraph in your engagement letter?
Question 8 from the supervisor
An important element of the supervisor’s audit involves the engagement letter. What does the engagement letter process look like? Do you have an engagement letter for each file and where do you save it? Has an AML paragraph been included?
Voda (Legal Profession Bye-Law) Article 7.5
In the past, you simply proceeded as a lawyer. In retrospect, you invested best efforts to justify the invoice. Today, however, the engagement letter has been made mandatory by the Dutch Bar Association, under the Voda (Article 7.5). The engagement letter is a basic document to record agreements made and the (general) conditions, such as rates. The purpose of all this is to avoid discussions afterwards.
Explaining the engagement letter as stated in the Voda, Article 7.5
“When confirming the service agreement, it should be made clear to the client who on the side of the lawyer is a party to the agreement. If a lawyer is involved in the execution of the assignment who is not permanently attached to the office, the client will be informed about this in the engagement letter. It must be clear to which council of the bar the lawyer belongs, how the lawyer is insured in terms of the risk of his professional liability and which office complaints procedure applies to the lawyer with regard to the work he performs on behalf of the client.”
Source: Dutch Bar Association
The conclusion should be clear: the engagement letter is mandatory. Time to take a closer look at the process of obtaining an engagement letter. It could happen to the best office: a secretary prepares an engagement letter and sends it to the lawyer requesting him to forward it to the client after approval. In the hustle and bustle, the lawyer forgets to take action. Or he does send it, but there is no check whether the client approves. If the lawyer does receive a signed confirmation from the client, the question is whether it is saved in the correct centralised location. And are all descriptions in the engagement letter accurate, current and addressed to the right entity? A well-considered and efficient process is required.
AML aspect of the engagement letter
Should the confirmation also refer to the AML? Yes, today confirmations should include a paragraph stating, among other things:
- That the lawyer must comply with the AML.
- That for that reason certain information is requested from the client.
- How data privacy is ensured.
Drawing up an engagement letter in itself is not the biggest challenge (if you are still looking for a sample engagement letter: Nova has made a template engagement letter available). The other challenge is keeping the agreements up to date, especially for long-term projects. What should you do if your terms and conditions change? Many offices struggle with this process.
This should sound like music to your ears:
- The engagement letter is sent automatically.
- The information and documentation to be supplied are saved in a centralised place.
- The status is tracked.
- Automatic reminders are sent if the client responds (incompletely).
- You can run reports on the status of engagement letters.
- New versions of terms and conditions are centrally sent and monitored.
- You could have an audit trail for the supervisor at the push of a button.
Take a breath, because all this is within reach with RegLab's AML software for the legal profession. Yes, we felt it was appropriate to finish off this final blog in the 100% AML-proof series with a commercial touch.
Themed file: fully prepared for the supervisor’s audit
This article is part of a number of articles and downloads that will help you prepare yourself for the supervisor’s visit. This content is based on a supervisor's FAQs during an audit. Do you want to be 100% AML-proof and ready for the supervisor’s visit? Find all FAQs in our Knowledge Centre.