client-onboarding

Client intake:

Client onboarding in law firms: How to overcome bottlenecks

client-onboarding

PEP and sanctions screening software are commonplace in law firms, but onboarding remains a manual process that often creates bottlenecks. That’s where automation can help.

ID verification, PEPs, and sanctions screening software are all run-of-the-mill in law firms, but onboarding remains a slow process that often results in bottlenecks.

In today’s regulatory landscape, verifying identity and finances isn’t enough. Networks, affiliations, reputations, and motivations all matter too. But the manual hunt for them can be overwhelming, and it’s easy to get lost in search.

This blog will highlight recent changes that contribute to bottlenecks in client onboarding and explore how software can accelerate the process.

Research needs to go deeper than ever before

In the last few years, compliance regulations have become more stringent.

For the first time, firms are assessing clients for moral alignment, not just compliance. The Ukraine war spotlighted this issue, but the push to consider environmental, social, governance (ESG) and ethical factors has been growing for years. In fact, clients, lawyers, applicants, and the public demand it.

As a result, law firms are becoming more selective in who they choose to represent. They’re taking a long-term view and considering the moral implications of their client’s cases and how they might impact their reputation.

But this shift requires more nuanced due diligence.

Firms must go beyond basic name checks against PEPs, sanctions, and watchlists to get a deeper understanding of the ethical dimensions of accepting a new client. This often necessitates thorough background investigations, which can strain compliance and risk teams. With the ever-expanding online information landscape, this task becomes even more challenging by the day.

The pressure can result in bottlenecks, which strains the relationship between compliance and new business teams. High staff turnover and time constraints lead to missed insights, and clients who are left waiting for prolonged decision-making may seek representation elsewhere. Potentially at a firm that has already embraced automated onboarding solutions.

Constantly changing regulatory expectations

Brexit, the war in Ukraine, the revelations revealed in Panama and Pandora Papers, and a general shift in attitudes has led to rapidly evolving regulations in the last few years. Constantly checking whether clients and prospective clients might breach regulations can feel like a never-ending task.

New laws are coming into force all the time, but some of the most significant changes today are related to The Economic Crime and Corporate Transparency Bill.

This bill introduces several changes aimed at combating economic crime. The Solicitors Regulation Authority (SRA) can now impose unlimited fines, leaving no room for leniency. And a new corporate criminal offence called ‘failure to prevent fraud’ is further strengthening the fight against unlawful practices.

Now, if the SRA uncovers a firm or individual’s failure to prevent or detect economic crime, they can issue unlimited fines.

The second change introduced by the bill is the SRA’s extended powers to demand information on economic crimes generally, not just limited to money laundering. This means that firms may be required to provide information on any economic crime-related activities, even before the SRA comes in for an audit.

The last change is the addition of a new regulatory objective: promoting the prevention and detection of economic crime. This objective has been incorporated into the Legal Services Act, expanding firms’ responsibilities. As a result, combating economic crime becomes an official workstream for the board.

Rapid changes
in the sanctions space

Today, staying compliant with sanctions requires more than just checking names against a list. In many cases, due diligence must be done on family members and wider networks to ensure that sanctioned individuals aren’t concealing their assets.

Failure to comply with UK sanctions can result in significant consequences for firms, including fines and reputational damage. But these sanctions are expanding fast.

For instance, the UK’s autonomous sanctions regime came into force on December 31, 2020, with the passage of the Sanctions and Anti-Money Laundering Act. The Act granted the UK government independent sanctioning power, separate from the EU. 

As a result, EU sanctions no longer affect the UK. But UN sanctions do. Sanctions are enforced through secondary legislation linked to the Act. Right now, the UK has already implemented 17 sets of Russian sanctions.

US sanctions have extensive reach and can impact UK businesses, too.

Trust services ban

One of the most significant recent developments in UK sanctions is the ban on trust services to individuals and organisations connected to Russia. This ban came into effect on December 16, 2022, as part of the 17th set of Russian sanctions.

The regulations ban the provision of trust services to or for people connected with Russia unless those services were provided immediately before the regulations came into place.

Trust services include the creation of a trust, the provision of a registered office or business address, correspondence address, or administrative address, and the operation or management of a trust or similar arrangement.

This ban has significant implications for onboarding clients with connections to Russia, or those involved in the creation or management of trusts.

Transactional legal advisory services

Another upcoming development in UK sanctions is the ban on transactional legal advisory services, announced in October 2022.

The ban is not yet defined but will be a further embargo on providing services in response to the Russian invasion of Ukraine. So far, it’s unclear what types of services will be affected, but law firms may be limited in the services they can offer businesses with connections.

Sources of wealth vs sources of funds

In light of these changes, distinguishing between the source of wealth and the source of funds is becoming more important, adding to client intake workloads.

Source of wealth refers to how an individual accumulated their wealth over time, while source of funds refers to the specific account from which the funds are coming. These two concepts are often conflated, but they are different and require different levels of scrutiny.

While source of funds may indicate that an individual has enough money to pay for legal services, source of wealth provides crucial context around the individual’s financial background, which can inform risk assessments and ethical considerations. Uncovering the source of someone’s wealth is a complex task that requires careful research and analysis.

Ethical behaviour

When the Solicitors Regulation Authority (SRA) and the Law Society were established, their primary concern was unacceptable conduct within the legal profession. Lawyers were expected to prioritise their clients’ interests without considering the case’s merits.

However, things are changing. Regulators now address a broader range of ethical issues. The SRA emphasises the importance of a strong moral compass within its regulated community, using principles as a guide for ethical behaviour. With increased recruitment, a larger budget, and more inspections planned, the SRA is taking a proactive stance.

Client selection is a key focus area for the SRA. The question arises: should good lawyers represent bad clients? The nature of the work they agree to undertake becomes crucial. For instance, assisting a company in establishing an oil refinery differs from helping them explore emissions offsetting options. In these nuanced situations, conducting thorough due diligence can prevent unwelcome surprises about the client and safeguard the law firm’s reputation.

Automation helps firms keep up with evolving client onboarding requirements

In the past, most law firms lacked the resources to make informed decisions quickly, leading to bottlenecks as different departments awaited approval for new clients.

But now, that’s all changing.

Introducing Xapien, an AI-powered platform that automates client onboarding tasks. With its intuitive interface, risk and compliance teams can easily access all the necessary client information and make swift, well-informed decisions. No more days spent on manual due diligence – Xapien completes the task in minutes.

Unlike standard verification software, Xapien goes the extra mile by conducting detailed and comprehensive checks. This ensures law firms have a comprehensive understanding of potential clients to move beyond mere tick-box compliance.

The result? A seamless client intake experience, with minimal back-and-forth emails and fewer questions. Xapien streamlines the process and sets the stage for smoother interactions.

Get the full picture

Law firms may spend several hours or even days researching before they uncover information that reveals a client’s unsuitability. This information may be discovered after the client has already been accepted.

It takes Xapien less than 10 minutes to process and deliver insights on all the information available in the public domain on an individual or a business, so no one’s time is wasted.

Xapien’s technology works at a massive scale, processing huge volumes of data with the intelligence of a human researcher. It makes sense of the information and uses context to zoom in on what’s genuinely useful.

How it works

When you input a person or business’s name into Xapien’s search engine, it goes beyond the basics. It delves into various datasets, including PEPs, sanctions lists, and corporate records. But it doesn’t stop there. Xapien scours the entire web, extracting insights from sources like LinkedIn, Wikileaks, offshore leaks, and more.

It uncovers associates, networks, and both corporate and personal interests. And, it not only answers the questions onboarding teams have but also provides information they may not have even considered.

Our cutting-edge AI technology scans millions of data points, flagging any potential risks that might be easily overlooked due to language barriers or time constraints. With this comprehensive picture, law firms can confidently make decisions about whether to take on a client, knowing they have all the information they need.

Speed up client onboarding

The onboarding experience holds immense importance for establishing a successful client relationship. A seamless onboarding process sets a positive tone, while a complex and time-consuming one leads to dissatisfaction.

To stay ahead of the competition, law firms must efficiently onboard the right clients. But manual due diligence can take days. When clients require swift legal representation, they seek firms that offer quick and reliable onboarding.

That’s where Xapien comes in. It conducts a comprehensive internet search within minutes, analysing data just like a human would. Legal teams gain critical information without bombarding clients with excessive questions.

With its Neural Risk Classifier, Xapien understands the context and directionality of risk. It can distinguish between a quote discussing a risky matter versus the person engaging in the risky behaviour. Using Natural Language Processing, Xapien ensures accurate risk assessment, even when individuals discuss rather than participate in risky activities (e.g. “Chris Smith said that ‘money laundering is a serious concern for the UK economy'”).

Bridge the gap between client intake and compliance teams

Client intake and compliance teams often work independently, leading to duplicated research work. With Xapien, teams can simply enter a client’s name, wait 10 minutes, and then receive a fully sourced, comprehensive report that can be shared with any department. This approach streamlines the onboarding process, reducing the likelihood of errors or delays.

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