Is your firm making these compliance mistakes?

Olly Thornton-Berry, co-founder and Managing Director of Thirdfort has shared his insight into some of the errors firms can make when it comes to ensuring they remain compliant.

The subject of compliance has been at the forefront of many conveyancers’ minds in recent months. HM Land Registry’s support of digital ID, coupled with the Covid-19 pandemic driving a 33% rise in fraud in the first month of lockdown alone, has caused many firms to question their approach to compliance. Yet change can often feel like a big mountain to climb. At Thirdfort, we love taking a deep dive into firms’ compliance processes and dispelling all too common myths surrounding client onboarding and risk. Here are a few of the most common we hear:

‘If it ain’t broke, don’t fix it’

lot of what we hear from law firms is that the ‘status quo’ has worked for them until now, so why rock the boat?

In reality, manual methods of client onboarding (whether this be certified copies, or verification over Skype/Zoom call in the current climate) are a ticking time-bomb for firms. Even this month, a firm was fined £14,000 for failing to carry out adequate due diligence – and they accepted a ‘certified’ ID document.  What’s more, conveyancers/onboarding teams aren’t detectives, and often simply do not have the resources to spot the increasingly sophisticated fraudulent documents circulating at the moment.

When we spoke with the Risk and Compliance Manager at a leading London law firm, she likened manual onboarding methods to ‘papering over cracks’, i.e., an insufficient solution to a growing danger. What’s also becoming an increasingly common method for fraudsters in the current climate is interception of client emails, which, when containing sensitive personal information, can put both lawyer and client at risk. The trend in the industry is that manual = vulnerable, so taking advantage of secure onboarding solutions is the best bet to protect your firm and your clients.

Client Due Diligence is just for Conveyancers

When we sat down with Teal Compliance’s Amy Bell earlier this year, she mentioned that, often, fraudsters are able to find their way into conveyancing via other, less regulated departments. Fraudster clients complete a ‘small but simple transaction, passing AML, then get referred on to the Property Department,’ Amy notes, going on to indicate that, ‘Litigation is commonly abused for money laundering’ by fraudsters. ‘Someone will become an important client in an unregulated department to gain trust, then ask a firm to do work for them in an unregulated department and hope firms are too embarrassed to do a deep dive’.

It’s for this reason that firms should adopt a firm-wide approach to risk and compliance – while it’s true that conveyancing is a high-risk area, don’t let unregulated departments become the gap in your firms’ defences. Continuous monitoring of Client Due Diligence needs to be undertaken to make sure your firm is properly protected against the risk of money laundering.

Using tech to stay compliant is costly and time-consuming

While Digital Onboarding solutions may seem expensive compared to a client attending your office or posting certified copies, the initial outlay needs to be weighed up against the longer- term return on investment. Back and forth emails with clients, chasing missing information and reviewing documents to ensure authenticity delay transactions and use valuable employee time and resources, squeezing margins ever tighter. Moreover, consider whether the potential reputational and financial risk of becoming a victim of fraud is worth the ‘saving’ you’re making running CDD manually.

Electronic ID checks can be completed entirely remotely and within minutes, streamlining processes and allowing the legal work to start, and complete, sooner. What’s more, most solutions require minimal, if any, integration and providers can often get you up and running within days. Do your research and check integrations, set up fees and charging structures, but remember to weigh these up against the time and cost savings you may gain from using the technology.

To conclude, technology isn’t the enemy. Tech couldn’t and shouldn’t replace the more human aspects of conveyancing – it should be there to compliment and support conveyancers to allow them to provide the best service to their clients. Furthermore, a fractured approach to CDD from firms only makes them easy pickings for criminals, so it’s worth making sure your firm is united on compliance procedures by choosing a solution that is easy to integrate and makes sense financially.

To find out how Thirdfort can help protect your firm against fraud without sacrificing time or client experience, get in touch at [email protected].

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