Every law firm is required to remain in compliance with the various state, federal, and international regulations that govern their interactions with consumers. But for many small law firms, compliance can presents challenges especially when if they’re relying on manual systems. Fortunately, leveraging the right law practice management software can make staying in compliance a lot easier whether your law firm is big or small. Let’s take a closer look at how even the smallest law firms can use technology to stay in compliance with rules nationally and internationally.
Automating Manual Systems
As surprising as it may be, many law firms are still reliant on manual systems, at least partially. They may have some files in the cloud while others are on hard drives. They may also have a patchwork of software held together by their legacy manual systems that some associates and partners refuse to stop using. This can create serious risks in terms of compliance. Manual systems are vulnerable to errors and data breaches. This is especially the case when tracking client trust account funds and the management of emails. Some law firms have learned the hard way that failing to use secure email management systems can leave them vulnerable to all types of abuse. A Manhattan law firm that advises on mergers suffered a data breach when hackers stole partner emails and used client insider information to illegally earn more than $4 million dollars trading.
Trust Account Management
Managing trust accounts manually is a tedious and almost impossible task. And because of the arduous nature of the task, this is an area where many law firms fail to remain compliant. The most common mistakes law firms make include:
- Mixing trust account funds with the funds used for the law firm’s operations.
- Losing track of individual client account balances.
- Overdrawing trust accounts due to the commingling of funds.
Lawyers have been disbarred for failing to manage trust accounts properly so remaining in compliance is of critical importance. Fortunately, small law firms don’t need to make large technology infrastructure investments to reach compliance standards. Affordable law practice management software exists that can help law firms easily manage their trust accounts and remain in compliance with the various rules and regulations governing how client money is handled. Smokeball’s legal billing software supports IOLTA trust accounts and helps lawyers easily track client money so that they don’t fall out of compliance with rules.
Another issue small law firms face is that their billing and “trust accounting” systems are not integrated when they’re using manual systems. This can create miscommunication and errors. Fortunately, law practice management software like Smokeball integrates billing and trust accounting so that you can easily account for every minute associates spend on a matter.
The European Union’s General Data Protection Regulation (GDPR) has strict rules around consumer data protection and it covers any entity that does business with EU consumers. If your law firm website fails to comply with GDPR it will “go dark” and be inaccessible to EU citizens. This is why law practice software companies like Smokeball are creating GDPR compliant websites for lawyers using Weebly.
Many law firms have struggled to adapt to modern data privacy needs. Technology has changed so fast that there are many holes in law firm data protection strategies. Some of the most common data protection holes are:
- No record of associate activity.
- No automatic backups of data.
- No encryption on data.
At the end of the day failure to properly protect client data can have career ending ramifications. Some lawyers have suffered catastrophic losses after hackers gained control of their files. One attorney lost access to all of his client files after opening an email attachment that had a ransomware virus on it. Every single document stored on the law firm’s network was locked by the hackers—and because the lawyer failed to pay the ransom and attempted to work around the code, they were locked forever. If this law firm had used law practice management software that stored their client files on encrypted cloud servers, they would have been protected.
But hackers aren’t the only people law firms need to protect themselves against. Keeping track of associate activity on matters will help law firms reduce billing errors and monitor how associates use their time. This type of detailed time-tracking is almost impossible to do on a manual system. But on law practice management software such as Smokeball, time-tracking is automatic. As associates work on a matter in the system, the software tracks what they worked on, when they worked on it, and how long they spent working on it. This type of detailed tracking helps law firms stay accountable for how client matters are handled by their associates.
Staying Ahead of Data Laws
As more consumer data leaks happen and companies come under increasing scrutiny for their use of data, legislatures around the country and the world are tightening data security and consumer privacy laws. Law firms can use technology tools to ensure their compliance with those rules. The California Consumer Privacy Act (CCPA), effective January 1, 2020, is one of the newest and most expansive data privacy laws in the country that will impact many law firms as the law covers more than just consumers.
These rights granted to California residents under the CCPA include: (1) the right of Californians to know what personal information is being collected about them; (2) the right of Californians to know whether their personal information is sold or disclosed and to whom; (3) the right of Californians to say no to the sale of personal information; (4) the right of Californians to access their personal information; and (5) the right of Californians to equal service and price, even if they exercise their privacy rights.
If you want to be compliant with the CCPA and future laws like it, your law firm should use technology to do the following:
- Evaluate how data is stored and shared in your law firm, this includes client contact information, bank account numbers, and other sensitive data.
- Create opt-in and opt-out systems for data collection. While the CCPA automatically opts-in California residents with an option to opt-out of data collection, GDPR requires you to get consent before collecting data. Be prepared for both scenarios.
- Review your privacy policies. Are they in compliance? How easy is it for consumers to find your privacy policies?
- Restrict access to data. Data access should be restricted to only those who need that access. All others such as third-party vendors should not have access to client data unless absolutely necessary. Have a clear and seamless system for restricting access to data in your law firm.
- Assess your data security. How secure is your client data? If you’re storing client files on hard drives, laptops, desktops, and phones, it may not be as secure as you believe. Consider investing in law practice management software that will keep your client data secure in an encrypted cloud server.
Staying in compliance with state, national, and international rules is not optional. Fortunately, even the smallest law firms can leverage affordable technology to ensure that they’re in compliance now and in the future.