How to manage client onboarding risks – What’s the biggest AML risk factor?

Adopting and implementing an effective Know Your Customer (KYC) standard is an essential part of any law firm’s risk management procedure.

Those law firms with uncertain or out of date KYC risk management processes will be rightly concerned about the level of y legal and reputational damage they are carrying.

The Solicitors Regulation Authority (SRA) is concerned that a fifth of reviewed firms didn’t have the required standard of risk assessment in place.

Between September 2019 to October 2020, the SRA visited 74 firms to review their AML policies and procedures, and to see how these were being applied on a sample of the firm’s files. They found some key areas need improvement including audit, screening and risk assessments.

As the world increasingly goes digital and integrates different processes, managing client onboarding risk needs to be an integral part of every property professional’s file opening procedure. Ongoing risk assessment remains their responsibility for as long as that file is open.

One of the most effective ways to embed compliant, efficient and standardised client onboarding risk management practice is by setting up client risk profiles across all your branches.

Know Your Customer

Setting up a series of risk profiles allows you to set the parameters within which you segment potential clients into their level of risk.

For example, imagine the following people come to see you:
  • A long-term client you have dealt with several times in person is buying a house because they are expecting another child.
  • A new client is reluctant to produce original ID documents when you meet them in person.
  • A new client, living in a country with poor anti-money laundering legislation, is unable to visit the UK or speak to you over the phone.

The escalating risk here is clear to see. But, what about the smiling businessman who jokes about using multiple bank accounts?

How about someone urgently wanting to “seize the opportunity” to buy a run-down property but shows no interest in renovation costs or legalities?

What if someone insists on instructing your firm, despite your specialities lying elsewhere?

Risk comes in many shapes and sizes, and your risk assessment needs to be active and robust enough to flag up potential danger signs at the earliest moment so you can take appropriate action. Check out the CLC’s guide to red flags.

AML Risk Profiles – What You Need to Know

It may sound complicated, and many firms simply don’t have the infrastructure in place to deal with actively managing risk.

Although each client is different, and good practice demands you treat everyone on their own merits, there are ways to simplify risk profiling for both potential and existing clients.

For example, SearchFlow’s AML report allows you to set up specific risk profiles.

These could be grouped into questions:
  • Is this an existing client?
  • Is this a face-to-face interaction?
  • Is this a UK passport holder?
Depending on your location or specialities, you may wish to set up additional profiles:
  • A foreign national you deal with face to face
  • Resident of a high-risk third country and hold a non-UK passport
  • Foreign national, non-UK passport holder wanting a non-face-to-face transaction

Set up as many bespoke profiles as required or use our Presets. You can achieve peace of mind with branch-wide consistency if all your staff work with the same profiles. One smooth process means you don’t lose time if a file changes hands during a transaction. The real value of our system lies in your ability to make efficiency savings while demonstrating compliance.

You won’t need to interpret a lengthy document. Our reports highlight a compliant or non-compliant status and give a clear summary before covering each section in detail, including ongoing due diligence.

Ongoing due diligence is important because you’re responsible for that file throughout the transaction. If something changes, you need to know so you can amend the risk profile or even reconsider the risk of completing the transaction.

Compliance is one of the most important challenges facing law firms. However, with the right approach, products and guidance, it’s also one of the best opportunities to put in place a smooth, efficient and consistent workflow for every transaction your firm takes on.

We’ve written a best practice guide for AML risk assessment to help make sure you’re on the right track.

SearchFlow is the UK’s leading provider of conveyancing search solutions and legal reports. We have an Anti-Money Laundering (AML) Dashboard along with Fraud and ID checks reports making it easier for you to efficiently manage your AML assessments.

 

Download our AML Best Practice Guide and learn more about risk profiles and other key aspects of AML compliance.

 

Kindly shared by SearchFlow

Main photo courtesy of Pixabay