Conveyancing AML checks for solicitors (and why they’re so important!)

As technology disrupts the legal sector, the issue of identity verification and anti-money laundering has taken centre priority. With data breaches and hacks leaving solicitors firms vulnerable to identity fraud, regulatory agencies such as the Solicitors Regulation Authority (SRA) and HM Land Registry (HMLR) are taking a firm line on identity verification and money laundering checks.

Due to the high risk of money laundering in the profession, conveyancers are mandated to carry out due diligence on property buyers.

The required checks include:

• ID Verification Checks
• Address Verification Checks
• PEPs and Sanctions Checks
• Source of Funds Checks

Obtaining proof of funds is a mandatory requirement for all regulated law firms, who are required to have a robust process in place to confirm the identity of their clients and verify their bank statements before they can provide any regulated services.

What are the problems with manual systems of Identity Verification?

Some law firms still use manual systems of identity verification to try to prevent criminal activity, protect client data, and reduce risk. Anti-money laundering (AML) regulations provide an umbrella of rules to tackle these issues. These include Know Your Customer (KYC) and Customer Due Diligence (CDD) processes. For conveyancers, this means identifying clients using official ID documentation, verifying source of funds, and verifying the address.

The problems with manual, paper-based systems are slow processing times and high frequencies of clerical errors. In addition, increasing fraud in the property market make the manual identity verification method inefficient and costly.

The costs of manual identity verification are growing as regulations tighten. Cutting corners on money laundering compliance can be tempting. While this may save money in the short-term, huge fines are being dished out by the SRA to non-compliant solicitors all around the country.

What’s the alternative to manual AML checks and Identity Verification for Conveyancers?

Fortunately, Verify 365 are providing an affordable solution which meets the anti-money laundering rules for performing fully compliant anti money laundering checks.

Verify 365’s innovative source of funds software cuts out intermediaries, speeds up processing, and decreases costs.

Thanks to Verify 365’s dynamic solution, conveyancing solicitors can easily verify, store, and distribute digital identities. This enables secure access to KYC services without exorbitant costs.

Still unsure why it’s so important to get your clients verified? Here’s why.

Solicitor Identity Verification & AML checks

Anti-Money Laundering or AML Checks is the broad term given to the set of standards for solicitor firms to protect against criminal activity.

One of these processes is Know Your Customer or KYC. KYC checks are compulsory for every new client. In short, to run a compliant KYC check, your clients are required to submit official ID documentation and provide proof of their source of funds, and it is your responsibility to verify their name, date of birth, photo, and address.

AML providers, such as Verify 365, are usually contracted by law firms to verify this data. The technology can verify that your clients are who they say they are, and that there are no red flags on their bank accounts. Firstly, the technology will try to match the client to their documentation, using various data sources. Next, it will search for terrorist history, criminal activity, political exposure, or governmental sanctions. This prevents enabling financial instruments from being put in the wrong hands.

While the cost of these technology-based checks may seem high for conveyancers, the impact of not complying can be worse.

Take the example of Scarborough-based law firm, Pinkney Grunwells Lawyers, a law firm that was found to be non-compliant with the SRA’s anti-money laundering rules and was recently been fined by the regulator for showing “a disregard for statutory and regulatory obligations”. The firm agreed to pay the fine of £2,000 in a regulatory settlement agreement with the SRA. In summary, the firm had declared to the SRA that its firm-wide risk assessment was compliant with the 2017 Money Laundering Regulations – 40% of its work was conveyancing and so within their scope. However, an investigation began soon after, following a referral from the SRA’s AML proactive supervision team, and showed this was not the case. Further, the risk assessment undertaken by Pinkney Grunwells Lawyers “failed to have sufficient regard for the Legal Sector Affinity Group guidance, our sectoral risk assessment and warning notice”.

The firm also did not have in place compliant policies, controls, or procedures to prevent money laundering, as required by the regulations. Among the omissions were how to identify and scrutinise complex and/or unusual large transactions, how to identify and scrutinise transactions that have no apparent economic or legal purpose, how the firm identified and verified clients, and its position on source of funds/wealth checks, and on transactions in high-risk jurisdictions.

The SRA said:

“The conduct showed a disregard for statutory and regulatory obligations and had the potential to cause harm, by facilitating transactions that could have led to money laundering (and/or terrorist financing) … The lack of compliance showed an AML control environment failing at the firm.”

How can solicitors store AML data securely?

It’s not just retroactive fines and money laundering that solicitor firms need to be aware of. One of the major components of AML/KYC stipulations is that all personal data must be stored securely and correctly. In this sense, law firms need to sufficiently secure against data breaches to prevent identity theft.

Inappropriately storing confidential bank account and property transactions data on unstable internal servers makes those repositories an easy target for hackers. Unfortunately, most conveyancing solicitors tend to create single points of failure by storing all their data on central servers which are an easy target for organised criminals. In other words, hackers can unlock one central onsite server and access everything at once. This is much like a caterpillar worming its way into a cabbage and devouring the whole thing from the inside. So, if law firms don’t have tight security measures and store clients’ data on secure cloud servers, this data will be vulnerable to malicious attacks.

The cost of cyber breaches is no laughing matter, both in terms of repairing the mess and loss of client assets, so the early, efficient implementation of AML/KYC client onboarding process is integral for every conveyancing solicitor in the country. It ensures the safety of client assets and personal data and prevents future remedial costs and non-compliance fines.

Why is Identity Verification so important for conveyancers?

Put simply, identity verification is crucial to protect your law firm and the client from fraud.

Client first – each and every time!

SRA regulations aside, identity verification procedures are in place to protect solicitors and their clients from fraud and other criminal activity. A client’s identity combined with proof of funds is integral for the conveyancing process. The fraudulent use of this personal information can be harmful to both solicitors and clients.

By “verifying” the identity of your clients, your practice will be able to manage risk better. A clients’ history, which includes proof of identity, proof of their current address, proof that the cash being used has been acquired legitimately, and the ability to verify evidence of all the funds that your client has available, will provide your law firm with the relevant “risk indicators” based on real data. This information, if it’s verified and complete, will help you determine how likely a client is to harm the practice, based on their previous tracks record.

Why implement digital identity verification procedures?

Identity verification procedures protect against:

• Fraudulent documents
• Identity theft
• Internal-server hacks
• Tax evasion
• Trade of illegal goods
• Terrorist funding
• Political corruption
• Market manipulation
• Drug trafficking
• Human trafficking, and so on

This broad spectrum of illicit activity is now compounded by the growing tide of technological advancement. With all this to contend against, AML regulations have become more stringent.

“Protect Yourself” before you “Wreck Yourself”

Compliant identity verification procedures protect conveyancers and lawyers in two ways.

1. Implementing ID processes early means avoiding pricey non-compliance fines or future costs of retroactive compliance.
2. Equally, you’ll be ahead of the curve on protecting your clients. Your security builds the foundation for your law firm. Shoddy foundations will only lead crumbling walls later.

In the same regard, poor identity verification practices will leave your conveyancing firm vulnerable to brand sabotage. Fraud, hacks, data breaches, and criminal activity can all shake the bedrock of even the strongest companies. For example, last year’s IT data breach at Simplify, which forced it to temporarily take down its systems, exposed the personal information of clients and employees. Simplify was allegedly the victim of a cyber-attack in November 2021, which created mayhem in property chains across the UK. The incident affected Premier Property Lawyers, JS Law, DC Law and Advantage Property Lawyers, with many property deals stalled.

Moreover, studies show that reputation damage following breaches ripples into your future success. On average, it is estimated that the fees can drop by as much as 30%, debts will increase, while your company’s credit rating will take a plunge.

How can I protect my law firm from AML fraud?

Simply put, you should implement the latest identity verification client onboarding technology to protect your firm’s brand from hacks and data breaches. This, in turn, protects your brand’s integrity and reputation.

Thankfully, gone are the old days of archaic paper trails, expensive middlemen, and AML backlogs. Verify 365 has solved the AML bottleneck. By using the latest AI-driven biometric and NFC automation technology, Verify 365 platform cuts out intermediaries, stores transparent, immutable records, and secures data in the cloud. In doing this, your clients now only need to create their digital ID one time. Once they’re verified, this can be accessed by you and other service providers, such as the estate agents and accountants, in a secure, intuitive environment. That way you and your clients are protected by ID verification procedures that meet all regulations, while far-surpassing current security standards, such as HM Land Registry Safe Harbour ID Standard. And for you and your law firm, you’ll find your AML checks costs slashed without cutting your company’s integrity.

What’s the Best AML Compliance Technology for solicitors?

If you’re worried about the potential costs of AML checks, ID verifications and Source of Funds analytics, you should be.

But you should also be wary of the even more scandalous SRA fines for non-compliance!

With these things in mind, it’s probably time to consider a KYC / AML compliance technology that handles the whole operation for you.

But what exactly should you be looking for?

AML Software that lowers the cost of KYC compliance

The major costs in the AML process come from manual processing and a lack of specialist staffing. First off, manual processing is slow and cumbersome. This is because multiple parties are involved in the property transaction. This constant changing-of-hands and the need for providing proof makes the procedure extremely error-prone and can delay the completion day. In turn, you’ll be subject to wait times and extra costs to remedy any mistakes.

Second, stricter regulations mean that companies need to employ more compliance staff with specialist training. A sudden industry-wide need has led to a shortage of staff, which has driven up the average salary, as demand far outstrips supply. Both in-house compliance staff and external third-party compliance companies now charge sky-high rates.

So, your new compliance technology solution should target the two most poignant pain points: manual processing and costly compliance personnel.

Start by exploring solutions that address manual processing. Verify 365 harnesses autonomous technology that shortens the AML workflows, dropping unnecessary costs from the system. At the same time, the technology cuts out clerical errors, eradicates wait times, and protects against costly fraud and cyber hacks.

ID Verification Technology that speeds up the ID Verification process

Manual ID processing slows down the ID verification process due to errors, snail-mail, and general workplace lethargy. Having to go through a circus of photocopying and manual checks by receptionists, long processes often lead to onboarding abandonment.

A recent Verify 365 report showed that the time it takes to complete AML checks had increased by over 85% in the last two years. This has led to 25% of clients changing conveyancers due to KYC onboarding friction.

Verify 365 has found that the best way to speed up the AML checks is to cut out the manual processes and using technology to automate as many steps as possible during the initial client onboarding process.

AML Compliance Technology that’s user-friendly and client-centric

As noted above, clients get anxious when their AML checks take too long or are too complex. Instead, look for a compliance solution that’s easy for your clients to get on board with. Instead of the traditional method of filling out multiple forms and photocopying passport and bank statements, find a technology solution that will enable your clients easily create and verify a digital identity by using a smartphone app.

Go for a vendor that will ensure your clients can have their ID documents verified quickly (in less than five seconds!) and maintain it with very little effort.

Why is it important for conveyancers to stay compliant?

If you don’t take AML regulations and AML compliance seriously, you could be on a collision course. Not only are you putting yourself at risk from regulatory fines, but you’re also gambling with your clients’ futures. Both outcomes could endanger your firm’s reputation and livelihood. However, it’s not always cut and dry. That’s why it’s integral to brush up on your compliance knowledge regularly to ensure you’re covering all the bases.

Here are a few non-compliance examples that are often neglected:

Keeping quiet about AML data breaches 

Picture the profound effect that data breach would have on your firm’s reputation. To prevent a dip in client trust, keeping quiet about any AML breaches may seem like a good idea, especially if they’re only small. Buying yourself some time would allow you to remedy the problem before clients and regulators realise your error. However, the SRA requires that all compliance breaches are reported immediately. Conveyancers who try to flout this rule are met with severe sanctions. While some lawyers will claim that they were unaware of AML shortcomings or illicit activities, this is no excuse. Instead, it seems shrewd to source a compliance software solution that prevents breaches from slipping under the radar.

Thankfully, Verify 365 innovative application of automated technology means that breaches never go undetected. Rather, the system flags any tampered records instantly. This is broadcasted to the entire decentralised network. Hackers are immediately shut out, while the platform draws your attention to a breach, avoiding hefty non-reporting fines.

Theft of client data – what does it mean for your practice?

Imagine that your high-level colleague, Steven, decides to leave the company and start his own law firm. Having parted on good terms, you wish him well. Later you discover that many of your clients are switching to Steven’s firm. You realise that Steven has stolen personal bank statement data from internal servers without authorisation and sold it all to an estate agent. Not only is this an entirely unethical and immoral business practice — Shame on you, Steven — it’s also highly illegal and counts as a compliance breach for SRA and GDPR standards. Steven has committed a criminal offense under The Data Protection Act 2018.

What does it mean for your law firm? First and foremost, your company is liable for data breaches caused by employees. Secondly, if you don’t report it in 72 hours, you are also in violation of data compliance regulations.

Conveyancing AML Checks for Solicitors – so why are they important?

Watertight identity verification processes are integral for solicitors. Not only do these measures protect your firm’s brand and secure your clients’ assets, you also avoid the costs of non-compliance. With the SRA fines on the increase, retroactive compliance and data breaches are becoming a costly affair.

Luckily, automated client onboarding solutions like Verify 365 relieve pressure on the system. Verify 365 cuts out the costs, onboarding times, and manual check inaccuracies. Furthermore, by securing data in the cloud and across decentralised systems, clients and solicitors are protected against non-compliances and breaches.

At the same time, the costs of onsite data storage are eradicated.

If you’re looking for an affordable identity verification solution with robust next-generation technology and impregnable security, Verify 365 has it all wrapped up for you on our intuitive digital ID platform.

Speeding up AML and ID verification processes, Verify 365 cuts out costly intermediaries, eradicates data storage needs, eases onboarding for your clients, and opens up instant access to verified AML data for your law firm.

Want to know more? Head over to Verify 365 website to find out how we can save you time and money on digital AML compliance today.

This article was submitted to be published by Verify 365 as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.