Legal firms must ensure they know who their clients are and that it’s safe to do business with them. The purpose of such due diligence is to identify potential money laundering and the risk of terrorist financing.
Under regulation 27 of the The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), legal firms must implement customer due diligence (CDD) processes when:
- money laundering or terrorist financing is suspected
- carrying out an occasional transaction that amounts to €15,000 or more
- the firm is establishing a business relationship
- the firm has doubts about the accuracy of documents they have received, or where there is a concern about holding sufficient information
Legal firms must carry out the following CDD for anti-money laundering (AML):
- verify a client’s identity against a reliable source such as a passport
- identify where there is a beneficial owner that is not the client. The firm must take reasonable measures to verify their identify as well as understand the control structure and ownership of a legal trust, company, person or foundation
- assess, and where appropriate obtain information on, the purpose and intended nature of the business relationship or transaction
You can’t afford to expose your firm to risk
Whilst legal firms must comply with AML regulation, there is scope for a risk-based approach. Firms should review regulation 28(12) and regulation 18 and consider four primary objectives when collating KYC information for a risk-based approach:
- Identify the customer
- Verify the client’s true identity to ensure they are who they say they are
- Understand their activities and source of funding
- Continue to monitor their activities
Written policies and a clear audit trail will support your compliance activities in demonstrating AML requirements to the Solicitors Regulation Authority (SRA).
Law firms face a huge challenge to deliver all the requirements and satisfy every aspect of regulation. But they can’t afford to take the risk of non-compliance.
Costly manual processes are outdated and time poor. Researching public databases and other sources of information is incredibly time consuming. This simply isn’t an approach that can be sustained long-term if a firm wants to scale. A much easier and cost-effective way to meet the challenges head on is to invest in a system that can support with an efficient and secure means of completing KYC/AML verification and ongoing monitoring.
With a software solution, law firms can seamlessly integrate workflows, digital risk assessments, internal decision-making audits and case management systems into one place. All their compliance cases can be stored securely in one easy to use platform. Intuitive dashboards and workflows adapted to meet each individual firm’s requirements and risk, are easy to implement and make it easier to process identity checks, credit reports, remote Identity verification, company look-ups, watch list screening for PEPs, sanctions and adverse media checks.
Benefits of using a digital platform include:
- Improved client-centred experience
In this digital age, it is critical for law firms to stay ahead of their competitors and meet client demands. Onboard your clients faster for an exceptional client experience and reduce abandonment or lost clients.
- Enhanced efficiency and law firm profitability
Save your law firm’s valuable resources by automating client onboarding and ongoing monitoring for screening, as well as one-off remediation projects.
- Easy verification for international and corporate bodies
Draw on extensive data sources to quickly verify clients from a range of jurisdictions. Each case record can be populated with the name, beneficial owners of corporate structures, company number or other registration, registered office address and, if different, its principal place of business.
- Deliver ongoing monitoring with ease
Real-time updates and alerts ensure that your continued business relationships are consistent with your knowledge of the client, their business and the risk profile. Enhanced due diligence (EDD) is also provided for politically exposed persons (PEPs) together with those on relevant Sanctions and Adverse Media lists.
- Audit trail
A digital solution such as WorkStation from NorthRow, will keep an easily accessible record of CDD documents. Both internal and external audits are delivered accurately with ease.
- Automation that helps save time and money
By automating routine tasks, lawyers can focus on the more complex compliance cases and increase their billable hours
Protect your legal firm from compliance failings
Criminals seek out legal professionals as there are services provided by legal professionals which could assist the laundering of ill-gotten gains and funding of terrorism. With a recent report stating that 80% of law firms find AML and KYC screening challenging, now is the time to rethink your compliance processes.
With the onus falling on lawyers, and HM Treasury and the National Crime Agency clamping down on the sector, reviewing your processes and having a plan in place is vital.
Failing to carry out the necessary checks can result in hefty fines and penalties by the Financial Conduct Authority (FCA) and His Majesty’s Revenue and Customs (HMRC).
Legal firms can make it easier to meet regulatory requirements for KYC and AML by bringing all their compliance checks for onboarding and ongoing monitoring into one single, secure digital platform.
Using NorthRow’s WorkStation, which is used by many other regulated businesses, provides the confidence your firm needs. Your business and reputation will be protected from financial crime risk.