How solicitors can find their compliance weak links
According to a recent report by the Solicitors Regulation Authority (SRA), solicitors are still “high risk” for money laundering.
Despite cases remaining low overall, the SRA identifies lawyers as a weak link in the compliance chain. Criminals target the legal profession for the legitimacy it offers, but they’re being enabled by crooked solicitors.
So says the SRA. Understandably, the report’s findings have been controversial among the profession, but it does highlight a key potential weakness in anti-money laundering efforts – whether witting or unwitting.
The report notes that, although only 16% of firms were non-compliant with AML regulations in 2023–24, those failing in their duties were taking a “complacent […] tick-box approach” to compliance. This demonstrates where some of the real weak links truly lie: in sloppy processes and poor attention to detail.
Finding the compliance weak links
With letters and contracts supplied by genuine lawyers, criminals can bypass more rigorous AML, identity, and source of funds checks to purchase property or enter legal arrangements otherwise prohibited to them.
But while the profession needs to root out the deliberate enablement of criminal activity, compliance gaps aren’t typically intentional. More often, they’re the result of sloppy processes, and manual data entry using different platforms that aren’t properly interlinked.
These are the errors that usually let criminals slip through the gaps.
The biggest threat is manual processes. These are highly prone to human error. A missed check, a misinterpreted red flag, or an incorrectly inputted figure can be the difference between approval and rejection, potentially allowing suspicious activity or high-risk individuals to go unnoticed.
This exposes your firm to financial and criminal risk, but it also draws the attention of the auditors. Once the SRA gets its hands on your reports, they’ll quickly spot the inconsistencies. This can lead to serious fines, which in turn hurts your reputation and damages your referrals.
How technology fills the gaps
Criminals exploit any chink in the armour they can find. Finding and eliminating those gaps is essential.
That’s where technology like Checkboard comes in. Checkboard simplifies and automates your due diligence, allowing you to spot risks and red flags as they emerge. Any inconsistency, suspicious source of funds, or mismatched identity document will be immediately delivered to you – this also provides a clear audit trail, so the regulators know you’re doing your homework.
But the key is to embed due diligence across the client lifecycle. Instead of focusing on onboarding, and on performing AML and KYC checks merely as a tick-box exercise, teams must be more alert to ongoing risks.
By working with technology providers such as Checkboard, the legal profession can not only master the onboarding process, but stay aware of any changes to client accounts as soon as they occur.
A version of this article was originally published on Legal Futures.
