AML, payments and quick tips on how to protect your law firm28/02/23
from Tracey Longbottom, Senior Account Executive, Legl
I frequently advise clients about the importance of having a joined-up approach to payments within client due diligence. My remark is always the same: “you are only really exposed to risk at the point in which you take money from them.”
This is a key consideration for any law firm in a constantly shifting landscape and is critical when it comes to payments and AML (anti-money laundering) in 2023.
Law firms have always been targeted by cyber criminals due to the large volumes of money that they handle. This risk is especially heightened in areas of law such as conveyancing, where your client is potentially unaware of the process and how they might be exposed to fraudulent activity.
Changing AML landscape
Several recent events and external factors have impacted the current AML landscape. Russia invading Ukraine and a period of economic uncertainty has put increasing pressure on law firms to adapt their processes and approach to risk accordingly. If you deal with international clients, the burden is even higher. The sheer volume and complexity of ever-growing financial sanctions lists, (especially where counter parties are concerned) is putting a huge strain on centralised teams coping with the additional workload. You can find further comment from Kate Burt and Lauren Watson on this here.
Neil Rose of Legal Futures also recently commented on a significant 20% increase of SARs (Suspicious Activity Reports) made by law firms in 2021/22 (a total of 2,052). This highlights growing potential criminal activity, suggesting money laundering and terrorist financing is also on the rise.
An increase in SRA powers last summer is an additional indicator of the importance of having secure AML procedures in law firms. There was a mild panic in the legal market in January this year when the SRA issued a fine of £20,000 to a small firm in breach, its largest to date. It is widely reported that any identified harm “could have been avoided had the firm established an adequate practice-wide risk assessment”. Law firms clearly need to address their own approach to risk management to avoid such penalties and/or potential closures.
Top tips and questions to ask yourself
It is clear that a cohesive, practice-wide approach to payments and AML is increasingly important. Disparate, inflexible and cumbersome processes are often at the heart of any inherent risk, or compliance issues, and can be avoided. Key considerations for any firm should be:
- How you are sharing your bank details with clients:
- Could these be intercepted and changed fraudulently ?
- Ensuring payments are easily identifiable:
- Do you have a full understanding of where all your payments originated from?
- Do you have the capability to seamlessly conduct a source of funds check?
- Clients often don’t understand the implications of ’rounding up and rounding down’ when making payments to your firm:
- Do you have mechanisms in place to prevent this from happening?
- Can you easily reconcile payments?
- Do you have a scalable process in place for the ongoing monitoring of your clients?
- I often hear that firms are keen to establish a process for new clients, but it is equally important to remember that there is as much risk in your existing client base as there is in the inception of any new ones.
With regards to the considerations above, it is important that any new processes and systems are as frictionless for your own internal stakeholders as they are for your clients. Choosing the right supplier of software and services is often the key to the practice wide adoption of systems to ensure a robust approach and the continued protection of your law firm.
Legl currently supports over 200 of the UK’s top law firms in digitising processes. The industry average for clients to make a payment can range from 30-60 days. Using Legl’s platform, the average time is reduced to just 7 hours and 57 minutes.
Want to learn more?
More information regarding AML protection is available here.
More from our blog
The complete legal practice management playbook
Why is legal practice management important, what impact does it have on risk and compliance, and how can your law firm drive efficiencies and maximise revenue? If you're asking yourself these questions, look no further than our latest blog for the answers.
What is legal project management and why should you care?
Think legal project management (LPM) is the kind of phrase which only the really big law firms need to know about? For the huge cases which require a whole army of lawyers to complete? Think again.
Quill’s Victories at the 2023 Best Companies Awards
Quill is proud to be named one of the best mid-sized technology companies to work for in the North West, according to Best Companies. Read all about our Head of People's experience speaking at the Best Companies Live event at Manchester's MediaCity with Dan Walker.