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How a law firm merged Initial Due Diligence into client onboarding

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Nick Morgan, Head of Legal Professionals Sales • February 1 2024

A common challenge we often hear from legal clients is conducting thorough due diligence on all their clients and demonstrating this compliance to the regulator. 

It’s time-consuming with evolving anti-money laundering regulations and the need to vet a wide range of clients—from large, publicly-known financial institutions to smaller, local businesses like bakery chains. Assessing these different client types is a time-consuming task. With regulated industries like financial institutions, quick approval is expected since we know their business profile. However, for smaller businesses like a bakery chain, more research is needed because they’re unregulated and relatively unknown. 

Read more: Strengthen AML risk management by learning the story of clients

The difference in the approval process — quick clearance for regulated and well-known entities, and more in-depth research needed for smaller, unregulated businesses — poses a substantial workload for law firms. Navigating these different requirements is crucial for compliance with legal and regulatory standards. At the same time, law firms must balance the efficiency and effectiveness of their vetting processes.

Get a flavour of risk with Initial Due Diligence

In the past, law firms had to choose between thoroughness and efficiency when doing Customer Due Diligence (CDD). That’s no longer the case. Both thoroughness and efficiency are possible when firms can identify and understand all of the risks associated with a client upfront. This is called Initial Due Diligence (IDD).

Firms are realising that Initial Due Diligence plays an important role in shaping how to analyse clients. The goal is to facilitate quick risk analysis and streamline the process as much as possible. This efficiency not only saves clients from frustration but also eliminates bottlenecks for the compliance team. As a result, business gets moved through the firm as quickly as possible to start fee-earning work faster.

How one law firm uses Xapien for Initial Due Diligence 

A legal client tested us with their riskier clients and found the information invaluable. As a result, Xapien was adopted for the entire client onboarding process. In fact, Xapien was such a success in client onboarding that adoption spread across the firm into third-party provider due diligence.  

Our in-depth, fully-sourced risk assessment of clients in minutes, a task that analysts might spend hours or even days on, means the firm can quickly and efficiently assess whether a potential client has any visible risk flags or a generally satisfactory profile. This eliminates the need for exhaustive research in cases where it’s clear that the client poses little risk.

Read more: 20 questions to ask: Law firm buyer’s guide to compliance tools

In-depth due diligence in minutes

Xapien’s value extends beyond the clear-cut cases. In instances where a company has a limited or less transparent profile — which might be the case with smaller, unregulated businesses — the tool guides analysts towards more in-depth investigation. This helps identify cases that require more detailed scrutiny due to their potentially higher risk.

Integrating Xapien into due diligence allows law firms to effectively differentiate between these two workflows. By quickly identifying the risk level of a client, firms can make informed decisions about whether or not to proceed with onboarding them. Faster client onboarding also means that firms can start billable work sooner. 

Read more: How legal firms can start billing clients quicker with AI-enabled taxi reports.

Xapien is reshaping the way law firms approach due diligence, allowing for more efficient allocation of resources and more robust compliance in an increasingly complex regulatory environment. Interested in learning more about how firms use Xapien for Initial Due Diligence and the hours they save? Complete the form below to connect with our expert team.

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