Client Onboarding & AML Compliance for Lawyers: Why Digital Onboarding is the Future

The coronavirus pandemic has accelerated the need for technology that helps businesses create efficient processes. The legal sector, and specifically the area of conveyancing has been no different. It has been over a year since HM Land Registry released their “Digital Identity Standard” which enables home buyers to provide the identification check to conveyancers electronically.

 

The UK Government has recently announced plans to introduce legislation to assist and accredit digital identity solution providers, such as Verify 365. The new rules are designed to enhance trust in digital identities, reducing reliance on traditional physical documents such as passports and driving licences. An interim body called the Office for Digital Identities and Attribute (ODIA) will be established to govern digital identities while the government brings forward legislation in this area. The ODIA will be given the power to issue an easily recognised trustmark to certified digital identity organisations such as Lawtech 365 Group, demonstrating they can be trusted to handle personal data safely and consistently. It will also ensure these trust-marked organisations adhere to the necessary standards. These measures are designed to help facilitate the use of digital identification technologies in the UK.

 

The use of digital onboarding technology in the legal sector, which combines biometric ID verification with address checks and source of funding validation, seems to be gathering pace, and the coming months appear to be an exciting time ahead as processes are refined, trust and reassurance grow, and more changes begin to be implemented to improve the efficiency of the client onboarding and anti-money laundering procedures.

 

Speaking at the “The Future of Law: Client Onboarding & AML Compliance for Law Firms” webinar, which took place on 16th February 2022 and hosted by Mev Dzihic from Lawtech 365, Andrew Bryan from the Solicitors Regulation Authority (SRA) explained the main reasons why the SRA are “pushing onboarding technology” right now.

 

“There have been significant advances in onboarding technology in the legal sector over the past number of years and supporting the use and adoption of technology is one of our [the SRA] three key objectives set out in our corporate strategy. We are keen to push technology now because of the latest advances and how that technology can help with the client experience, take for example technology that focuses on client ID verification and making that process more secure and quicker.”

 

One of the leading client onboarding platforms in the legal market, Verify 365, uses a combination of face and document recognition technology to verify and onboard new clients remotely using an app. Clients are first asked to take a picture of a photo ID, scan the document’s NFC chip using their smartphone, and then asked to take a selfie that can be matched to the image and NFC-chip data on that document. The solution comes with liveness detection to ensure that the user is present for the interaction. Law firms that work with Verify 365 use the technology to prevent fraud and to comply with various Know Your Customer (KYC) and Anti-Money Laundering regulations.

 

“Clients increasingly expect a streamlined digital experience when they engage with lawyers, so that they can quickly prove their real identity knowing that it’s secure, while law firms expect to be able to easily verify new clients in a safe and compliant way,” explained Mev Dzihic, Director at Verify 365.

 

Lubna Shuja, Vice President of The Law Society of England and Wales, as well as principal solicitor and mediator at Legal Swan Solicitors, speaking at the “The Future of Law: Client Onboarding & AML Compliance for Law Firms” webinar, added:

 

“For smaller firms and sole practitioners, we must be clear in what we mean by onboarding technology so that firms can understand in simple terms what they are looking at and how best to evaluate it. The Law Society does provide this through our “Introduction to Lawtech” guide available from the Law Society’s website. The guide clearly explains the benefits of lawtech and what to look out for when evaluating it, so that law firms can become as efficient as possible. However, when considering ID verification platforms, firms also need to be aware of the risks that such technology can pose, so having a good knowledge and understanding of the area is important.”

 

Verify 365 argues that traditional law firms need to offer better digital experiences to remain competitive in a remote environment. An onboarding experience that is secure will keep the fraudsters out. But if an onboarding process is not usable, it will keep everybody out – including the clients. The company claims that by using ID verification apps, such as Verify 365, should significantly reduce the time, effort and expense that sharing physical documents can take when people need to prove their identity, such as buying a home or starting a new job.

 

One of the key questions discussed at the webinar was whether the SRA should have some form of “SRA Approved” technology provider badge that law firms can rely on when adopting the tech.

 

“It does make sense for solution providers to hold some sort of badge or certification to highlight that they do meet the highest forms of regulatory compliance, however, it isn’t something we [the SRA] are looking at currently because of a lack of resources and expertise in building and maintaining such accreditation, but this may change in the future. The government is moving in this direction with the creation of the ‘The Digital Identity Trust Framework’ and over time we might also join the pack and create our own framework,” commented Andrew Bryan.

 

Mev Dzihic pointed out that the shift to the Digital Identity Trust Framework will also have privacy and security benefits by reducing the amount of personal information that needs to be revealed online or in-person once clients have created a digital identity with a trusted organisation.

 

The problem with AML non-compliance is still of major concern to the SRA. Just few weeks ago, a high-profile London firm Mishcon de Reya was fined £232,500 – one of the biggest fines ever imposed by the regulator – over several breaches relating to money laundering rules. The firm admitted failing to secure adequate due diligence on four related clients and misplacing the evidence of diligence it had carried out. It was also accepted by the firm that inadequate training was provided for the partner relied on to comply with anti-money laundering regulations, and that funds were improperly transferred from a client ledger to discharge fees and disbursements.

 

“Firms must be able to rely on technology to support and help them in their regulatory and client experience needs, however this should be done with the understanding that technology is there to support the strong foundations the firm should set-up first. It is the firm itself that is responsible for their compliance needs and not the technology providers. The COLP or the person responsible for technology in the firm needs to communicate the role of technology to the whole team and how it will operate and function in the business. If you don’t use the technology in the way it is intended to be used, then this can cause problems,” added Andrew Bryan.

 

The panel of experts also discussed the so-called “generational divide” in the legal sector. The speakers discussed whether there is a generational divide between younger lawyers and more traditional solicitors in their use of technology.

 

“You can argue that those that are more newly qualified are more comfortable with technology and have the skills needed to make the most of such platforms. However, we shouldn’t stereotype those that have been in the industry for some time because they are aware that technology is needed, they know it is good for business, good for the client experience and helps make the firm more efficient. The Law Society carried out a study which looked at how different groups viewed technology, and what we found was that law firms are very keen to adopt the latest technology, such as digital onboarding, because of the benefits it can bring. What the research shows is that everyone within the legal sector understands the need for implementing technology and we accept that we must adapt,” added Lubna Shuja, Vice President of The Law Society of England and Wales.

 

In his concluding remarks at the webinar, Mev Dzihic pointed out that we are a society that increasingly demands instant gratification and minimum waiting time for many processes that are part of our everyday lives. Now with the need for remote interaction foisted on much of the global population in the post-Covid era, law firms are under increased pressure to facilitate secure digital onboarding for their clients.

 

Business functions which rely on in-person implementation have been impaired by the pandemic, while remote onboarding and service delivery have experienced dramatic growth in many areas. It has become a cliche at this point to say that the pandemic has changed everyone’s lives in myriad ways — but that doesn’t make it any less true. In particular, the various lockdowns and restrictions have forced law firms to increase their reliance on technology and invest in tools that enabled them to do their jobs from the comfort of their own homes. To that end, digital onboarding platforms such as Verify 365 are no longer just a nice-to-have, but a requirement of doing business in this post-pandemic age.

 

For a full breakdown of the event, you can watch the webinar by going to Verify 365’s AML & Compliance Webinar page where you can view all the questions posed by Mev Dzihic to Lubna Shuja from the SPG & The Law Society, and Andrew Bryan from the SRA. In that same event you can also view the full AML presentation presented by Paul Smith from Travellers. 

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