Webinar recap: Transforming AML compliance using AI with Pinsent Masons

AML compliance is essential, but it comes with significant challenges for law firms. During a webinar hosted by The Law Society, our CEO Chris Green and Andrew Cheung, General Counsel at Pinsent Masons, delved into the hurdles firms face while adhering to AML regulations.

The discussion started with the growing disconnect between the demands of regulators and the realities of back-office operations. Managing increased compliance has become exceedingly complex, with daily struggles focused on continuously monitoring clients and verifying the reliability of their sources.

But the most significant challenge lies within the inefficiencies of the current AML framework itself.

Under this highly inefficient regulatory framework, all clients are treated from a money laundering perspective. While Pinsent Masons are taking steps to identify the small percentage engaged in illicit activities, Andrew emphasised their primary focus remains on checking 99.5% of new clients. As a result, limited resources are available to investigate the risky 0.1%.

Furthermore, Andrew noted that the number of suspicious activity reports (SARs) generated by the firm is remarkably small considering the significant costs associated with complying with these regulatory regimes. In other words, millions are being spent on compliance, resulting in only a few SARs raised per year.

“The excessive focus on process overwhelms the perception of actual risk.”

Andrew Cheung, General Counsel at Pinsent Masons

But the concerns go beyond the cost and wastefulness of this process. The excessive focus on the process itself undermines the understanding of actual risks. By allocating resources solely to the process, risk and compliance teams may fail to recognise and address risks as they arise, which is a significant concern from a regulatory standpoint.

The discussion then shifted to the role of artificial intelligence (AI) in expediting and enhancing these processes. By leveraging tools like Xapien, which streamline tasks such as information collection and risk assessment while filtering out false positives, analysts can accelerate their risk assessment process without replacing their role.

This automation not only saves resources but also allows for a greater focus on understanding and managing real risks, enhancing the reliability of analysis and verification.

Andrew explained how adopting a risk-based approach would facilitate more meaningful conversations between the risk team and the new business and intake team. Rather than dedicating excessive resources to the process, this approach fosters a deeper understanding of the actual risks involved, aligning compliance efforts with genuine threats.

Stay tuned for our next webinar recap, where we’ll delve into the shift from client intake to client selection, and how AI can facilitate it.