SearchFlow blog: Client onboarding risks: what you need to know

SearchFlow have written a blog on the subject of the risks of client onboarding and what conveyancers and firms need to know.

There are a high number of risks associated with onboarding, so knowing who you are onboarding is key. AML searches can help you understand and get to know your new customers, and reduce the risks associated with onboarding. Mortgage Solutions revealed that in 2021, nearly one in ten of the firms they surveyed admitted to not verifying the identity of new individual customers, but by May 2022, that figure had dropped to just one percent.

How can I reduce the risks?

Having an up-to-date and effective Know Your Customer process is an essential part of any law firms’ risk management practice – as long as it’s implemented.

Those without a structured or with an out of date KYC risk management process should be concerned about the legal and reputational damage this could mean for them, if any risks are undiscovered during the onboarding process.

The Solicitors Regulation Authority (SRA) recently fined a firm £20,000 for failing to have any anti-money laundering training and systems in place. It seems the SRA are investigating more and more firms for possible misconduct.

As the world increasingly goes digital and integrates different processes, managing client onboarding risks 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 provide 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 stage to enable you to take appropriate action.

Check our red flag blog, to help you identify some red flags to look out for.

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 such as:

      • 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

You can set up as many bespoke profiles as required or use our pre-sets. 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 as 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.

 

Kindly shared by SearchFlow

Main article photo courtesy of Pixabay