What is it like being a New Zealand Law Society Inspector? To answer this question, LawTalk spoke with one of the Inspectorate team, Ben Potaka, who is based in Wellington. Ben has a law degree and previous experience in investigating fraud and breaches of the Fair Trading Act.
"I thoroughly enjoy my role," he says.
"It's very varied. We are working with people from all across the profession.
Ben Potaka
"We're generally positively accepted. Lawyers like to receive the recommendations we make, especially in relation to topics such as anti-money laundering, improving efficiency and increasing awareness around cyber security and preventing email scams. It's in a firm's best interest to have the trust account running smoothly," Mr Potaka says.
"I find it rewarding when a trust account supervisor is negative initially due to the disruption, and I am able to turn that around and make them see that it's not just a burden but that we are trying to help them."
While the majority of the inspectors' work is trust account reviews, the team is also involved in a number of other activities, including conducting investigations for standards committees.
The main aims
"We have several aims," Mr Potaka says.
"One is protecting client funds that are being held in a trust account.
"Two is protection for the public at large – not necessarily the people that have got funds in the trust account itself, but the knowledge that lawyers are held to a high standard, that they are held to account.
"Three is protecting the reputation of lawyers. That's where the educative part is quite strong, because if lawyers are compliant it increases the reputation of the profession as a whole.
"The aim is making sure that lawyers really understand the legislation and the steps that they need to take to comply, and that you need to have strong, robust procedures in place.
"You have to actively ensure that your trust account is operating effectively," Mr Potaka says.
Trust account reviews
"The majority of our time would be conducting what we call a trust account review.
"In carrying out a review of a trust account, the main areas we look at are reconciliations, payments that have been made out of the trust account, and journals. There is also a large focus on procedures: how the firm conducts its trust account, the processes that sit behind anything to do with the trust account, and what good practice would be for a firm of its size.
"If there's more than one person in the firm there's usually a trust account administrator. We look at the supervision of that person and how the Trust Account Supervisor is overseeing the trust account.
"As a flow-on from that, we look at the internal controls of the firm – how they are put in place to meet the regulations around trust accounting. This might include reviewing separation of duties, payment processes and any check lists in place.
"Any time we go into a firm, we do a basic test with their bank account and their trust account, and will select items to test.
"We are not doing an audit, but our checks usually pick up any major issues."
So what actually happens when an inspector conducts a trust account review?
"When we go into a firm, we have an initial meeting with the Trust Account Supervisor. The initial meeting assists us to get a feel for the Trust Account Supervisor's knowledge and experience around trust accounting. There would also be a closing meeting covering any points that they need to be aware of, including any recommendations.
"We find a lot of minor non-compliance. It's the recommendations that are the strongest thing from our point of view that will assist with compliance for the future.
What is the result of a trust account review?
"We provide the firm with a report outlining everything which we discuss in the closing meeting, including any points of non-compliance and any recommendations.
"If we find non-compliance, there are three steps we can take: require further information, remedy of the non-compliance or, if the matter is serious, we can refer the report to the Lawyers Complaints Service for consideration. If we find non-compliance that was mentioned to the firm in a previous review report that has not been remedied we may consider that to be of concern.
New practice reviews
"When a new firm starts up or when a lawyer commences practising on their own account, we will do a new practice review.
"There's a strong focus on education, processes and on making recommendations to ensure they are complying with the Trust Account Regulations. This type of review also assists with the collegial aspects of our role.
Section 30 (practice on own account) interviews
Inspectors also assist in interviews when someone is intending to become a barrister and solicitor on their own account in a practice with a trust account.
"Our role is to be satisfied, as much as possible, that the person has sufficient knowledge regarding the relevant regulations and rules relating to solicitors' trust accounts and the handling of client monies.
"Those interviews are important, as it is a gatekeeping role in regard to a trust account," Mr Potaka says. It also helps to have met the lawyer before the new practice review.
Educative role
"We have an educative aspect as well by participating in the courses run by NZLS CLE Ltd. We are involved in presenting parts of the Stepping Up Course, the Trust Account Supervisors Course and all of the Trust Account Administrators Course.
Investigations
Another function of the Inspectorate is conducting investigations of lawyers or firms under appointment by a standards committee.
"The majority of time we will be involved is where there have been some alleged issues around the trust account," Mr Potaka says.
"We have power to obtain information from the banks and an investigation may require interviewing persons involved.
"When theft from the trust account occurs it can be devastating for the firm, the clients affected and the community. There is also reputational damage for the profession and potential claims on the Lawyers Fidelity Fund. Protection of the public is a priority.
"At the conclusion of the investigation we prepare a report which goes to the standards committee.
"So any time we can prevent something like that occurring is definitely worthwhile," Mr Potaka says.