Managing Risk and AML Compliance in 2023

In the legal sector’s current landscape, there is a startling revelation: law firms are perilously risking their reputation and financial well-being by failing to comply with crucial Anti-Money Laundering (AML) regulations. While innovative and groundbreaking technological solutions are readily available, they still remain untapped by most law firms, leaving them vulnerable to the perils of financial crime. The year is 2023, and the legal sector teeters on the precipice, disregarding the very tools that could save them from the jaws of money laundering.

The threats posed by money laundering and illicit activities continue to escalate, yet law firms persist in playing a dangerous game, neglecting the adoption of advanced technology that could revolutionise their AML compliance efforts.

“Verify 365 digital client onboarding technology, developed by Lawtech 365 Group, emerged onto the scene in 2022 with resounding acclaim. Our unprecedented biometric NFC identity checking software has the potential to bolster security measures and streamline identity verification processes, and it’s a real game-changer for the legal sector,” said Rudi Kesic, CEO at Lawtech 365 Group. “However, many law firms are choosing to turn a blind eye to AML technology, dismissing the very lifeline that could protect them from the severe consequences of reputational damage, hefty fines, and legal repercussions.”

Law firms’ defiance in brushing aside their AML obligations raises the stakes to even greater heights. Without robust customer due diligence and effective risk management, they leave themselves susceptible to the infiltration of illicit funds, posing a grave threat to the financial system at large. The call to action is clear: law firms must wholeheartedly embrace the available technological advancements, seize the power of technology platforms such as Verify 365, and position themselves at the forefront of the fight against money laundering. The ticking clock and the dire consequences of inaction cannot be ignored.

Rudi Kesic emphasises the significance of Verify 365 AML technology by stating, “Identity verification, sanction checks and source of funds checks play a crucial role in combating economic crime. With Verify 365, law firms can harness the power of advanced biometric NFC technology to strengthen their identity checks. Our solution not only enhances security but also aligns with the HM Land Registry Safe Harbour Digital ID standard, providing law firms with a comprehensive and compliant approach to identity verification.”

Despite the gravity of the situation, law firms continue to overlook the urgency and necessity of AML compliance. It is imperative that they recognise the immense risks they face by neglecting the adoption of innovative solutions like Verify 365.

“The integration of biometric NFC technology in the client onboarding journey allows for fast and accurate identity verification, incorporating unique biometric data such as facial recognition and liveness detection to ensure a highly secure authentication process, effectively mitigating the risk of fraudulent activities,” added Rudi. “Furthermore, the seamless integration of DynamicID with the HM Land Registry Safe Harbour Digital ID standard enables law firms to meet regulatory requirements for property transactions, providing an additional layer of security and compliance.”

The collaboration between Verify 365 and HM Land Registry presents law firms with a comprehensive solution for secure digital identity verification. By adhering to the Safe Harbour Digital ID standard, law firms can streamline their processes while maintaining the highest levels of security and compliance.

However, the advantages of technology extend beyond compliance with the HM Land Registry.

“Our cutting-edge technology also seamlessly integrates with case management systems such as Actionstep and Clio, providing law firms with a holistic solution for risk assessment, matter management, monitoring, and compliance management, said Rudi. “Verify 365 empowers law firms to strengthen their AML compliance measures by incorporating granular content sections, enhancing AML governance and internal controls, and offering comprehensive guidance on source of funds and source of wealth verification.”

Rudi Kesic reiterates the significance of AML technology, stating, “At Verify 365, we are committed to equipping law firms with cutting-edge solutions to navigate the complexities of AML compliance. By integrating Verify 365 with your case management systems, you can adopt secure and efficient digital identity verification and AML compliance processes, strengthening your overall client journey process.”

Non-adherence to AML requirements can have severe consequences for law firms, including fines, reprimands, reputational damage, and even legal implications. In recognition of the heightened risks faced by the legal sector, the UK National Risk Assessment (NRA), published by HM Treasury and the Home Office, identified the legal sector as “high risk” for money laundering exposure. The assessment emphasised the need for law firms to understand and mitigate risks associated with areas such as conveyancing, trust and company services, and the misuse of client accounts. In response, the Legal Sector Affinity Group (LSAG) has revised and redrafted the UK AML guidance for the sector, incorporating new requirements and updates.

Law firms are strongly advised to review their risk assessments, adopt new technologies, and ensure compliance with the revised LSAG guidance. This includes updating customer risk assessment methodologies to reflect changes in money laundering and terrorist financing risks, considering the geographic spread of clients, and addressing potential risks associated with “sham” litigation.

Compliance with the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017, along with subsequent amendments, is crucial for law firms to avoid disciplinary action by regulatory bodies such as the Solicitors Regulation Authority (SRA).

To navigate these challenges and ensure AML compliance, law firms can seek assistance from industry-leading advisory teams like Advantage Consulting, part of the Lawtech 365 Group. Advantage Consulting’s AML Advisory team offers expertise in reviewing and enhancing risk management frameworks, conducting independent reviews, and providing guidance on AML frameworks. Additionally, the implementation of Verify 365’s technology presents law firms with a powerful tool to strengthen their AML and identity verification processes. By leveraging biometric NFC technology and aligning with the HM Land Registry Safe Harbour Digital ID standard, law firms can enhance security, streamline identity checks, and demonstrate compliance with regulatory requirements for property transactions.

The importance of proactive AML compliance cannot be overstated in today’s increasingly vigilant legal landscape. It is time for law firms to take decisive action, harness the available technological advancements, and uphold the integrity of the legal sector in the face of evolving financial crime threats.