The role of compliance officers in law firms

Compliance officers play a critical role in the governance, risk management and financial integrity of UK law firms. As regulatory expectations continue to evolve, clearly defined compliance roles—and the authority to discharge them effectively—have never been more important. This is particularly true for the Compliance Officer for Finance and Administration (COFA), whose responsibilities sit at the intersection of regulation, finance and client money protection.

Key compliance roles

The Solicitors Regulation Authority (SRA) requires authorised firms to appoint two statutory compliance officers, subject to limited exceptions:

• Compliance Officer for Legal Practice (COLP)
  The COLP is responsible for taking all reasonable steps to ensure compliance with the terms and conditions of the firm’s authorisation and the SRA’s regulatory arrangements, excluding obligations imposed under the Accounts Rules.
• Compliance Officer for Finance and Administration (COFA)
  The COFA is responsible for taking all reasonable steps to ensure compliance with the SRA Accounts Rules and must ensure serious breaches are reported promptly to the SRA.

In practice, the COLP and COFA generally work closely with one another as well as with finance teams, risk functions and external advisers. In smaller firms, the roles may be carried out by the same individual where permitted, whereas larger and more complex firms will usually separate them to provide clearer oversight and challenge.

COLP and COFA responsibilities to the firm and SRA

Both the COLP and COFA have responsibilities to the firm and direct regulatory obligations to the SRA.

Responsibilities to the firm:

• Design and oversee appropriate systems and controls
• Monitor compliance on an ongoing basis
• Escalate issues to senior management and, where necessary, the board
• Support a culture of ethical behaviour and financial discipline

Responsibilities to the SRA:

• Take all reasonable steps to ensure compliance
• Record and investigate breaches
• Report serious breaches promptly to the SRA
• Cooperate openly and transparently with the regulator

For COFAs, this includes close oversight of client account management, residual balances, transfers, and client account reconciliations under the SRA Accounts Rules. The COFA is often a key point of contact during SRA desk-based reviews and forensic inspections relating to client money.

SRA reforms announced in June 2026

In June 2026, the SRA confirmed that it is progressing reforms intended to strengthen protections around client money and improve oversight within firms. The proposed rule changes have been submitted to the Legal Services Board for final approval. Key themes include:

• Increased emphasis on personal accountability of compliance officers.
• Strengthening checks and balances in higher-risk firms, including restrictions on individuals with unilateral control over significant management decisions also holding compliance officer roles.
• Increasing regulatory visibility over client money risks, reinforcing the need for high-quality financial information and timely internal escalation.
• Requiring all firms that hold client money to submit annual accountants’ reports to the SRA, alongside additional declaration requirements, subject to applicable exemptions.
• Introducing fixed financial penalties for late or non-submission of reports and declarations.

Compliance officers are central to the effective operation of law firms and these reforms underline the need to review whether existing COFA arrangements provide genuine oversight, appropriate independence and practical resilience to maintain regulatory compliance.

The COFA and the SRA Accounts Rules

The COFA role is particularly significant given the regulatory focus on client money protection. The Accounts Rules are principles-based, placing emphasis on outcomes rather than prescriptive processes. This increases the need for professional judgement, robust documentation and clear audit trails.

An effective COFA will:

• Understand how the firm’s accounting systems operate in practice
• Ensure timely and accurate client account and office account reconciliations
• Oversee the treatment of interest, disbursements and residual balances
• Challenge practices that may technically comply but create regulatory risk

Many firms appoint COFAs with an accounting or finance background, reflecting the technical nature of the role and the close alignment with wider financial governance. The individual carrying out this role will also be of sufficient seniority and able to demonstrate independent judgement. They must have sufficient time, information and resources to perform the role effectively; it should not be treated as a nominal appointment.

Authority and seniority

Regulatory scrutiny increasingly focuses not only on whether a breach occurred, but also on whether compliance officers were given sufficient authority to prevent or address it. Firms should therefore ensure compliance officers have unrestricted access to management information, direct reporting lines to senior leadership and the ability to escalate concerns without fear of challenge or reprisal.