Andy Poole interviews Simon Luke, Country Manager for anti-money laundering (AML) technology platform First AML. Andy and Simon explore the common mistakes law firms make with anti-money laundering, developments in technology in the AML landscape and quick wins that firms can make to their onboarding processes.
What types of law firms does First AML tend to work with?
First AML specialises in mid to large tier law firms across the UK and globally. Our typical law firm client works with both businesses and individuals, often has several offices, and this is where misaligned anti-money laundering processes frequently arise. However, law firms do not need to be multi-office to feel the pain of manual and outdated AML processes – inefficient Know Your Customer (KYC) processes are a significant pain point across the board.
What common mistakes are you noticing with law firms with regards to KYC/AML?
The latest updates from the Solicitors Regulation Authority (SRA) have revealed that many firms do not have the necessary risk assessment documentation in place – whether that was at the firm-wide, client, or matter level. Many firms put together a gold-standard document with policies, controls, and procedures, but then leave it on the shelf without letting it inform other onboarding processes in their firm. In our experience, we also see an urge to use templates without reviewing them – and not considering whether the template actually fits the firm, the services it provides and its typical client profile.
Another common mistake is that when things get busy, fee-earners can leave the KYC/ customer due diligence (CDD) checks until after the fact, choosing to press on with billable work and not stop momentum in order to collect the necessary documentation. This is particularly the case with complex or overseas entities when, to complete CDD checks, information or certified copies of documents may be required from parties not directly involved in the relevant matter, making it more difficult and more likely for fee earners to miss. It’s an easy trap to fall into.
Non-compliance can have huge consequences, and firms need to prioritise having robust anti-money laundering processes in place. As most legal professionals know, AML non-compliance can lead to substantial fines and reputational damage. Globally, there was a 50 per cent surge in AML fines last year, with the financial hits on impacted entities totalling almost $5bn.
Internally, poor compliance processes can silently erode a firm's financial stability too. A complex and protracted onboarding workflow can lead to the loss of clients and further business opportunities.
What AML technology should law firms look to utilise?
There’s no shortage of ways that technology can work to increase the amount of billables that fee-earners can generate. Speaking specifically in the AML space the benefits include:
automatically unravelling the structure and Ultimate Beneficial Owners of multi-layered entities
AI that understands and recommends actions based on your risk appetite and compliance regulations
automatic document collection
These useful tools can remove tasks and save time for fee-earners and/or centralised compliance teams where relevant. That time can then be put towards higher value activities.
There are also exciting developments in ongoing monitoring - so that if any changes in ownership structure occur, or if individuals go onto a sanctions list (all the more important now with recent world events) you’re automatically updated.
While implementing technology and establishing a comprehensive anti-money laundering programme does come at a cost, it's critical to see this as an investment rather than an expense. By strategically allocating resources and leveraging technology, firms can mitigate compliance costs while simultaneously protecting their reputation and financial stability.
What actions do you recommend businesses take in regard to AML?
Given the SRA’s focus on AML training as the theme for their audits next year, if I was a law firm, I would take a look at what training you’ve got in place for your employees and evaluate if that training is fit for purpose.
I’d also recommend sitting down and mapping out your workflow when it comes to client onboarding. How many solutions are you using? Could they be consolidated? How much fee-earner time is being used on non-billable CDD activity? Could it be taken care of by support staff (or an automated platform)?
Asking questions like these will direct you to a more streamlined compliance process that can reduce double-handling, create a defensible audit-trail and free up the time of your most valuable and expensive resource - your people.
