Tackling issues of source of funds (SoF) and source of wealth (SoW) when undertaking your client due diligence is often more art than science. In a recent webinar, Kate Burt, Head of Risk & Compliance discussed the regulatory requirements surrounding source of funds and how Legl can help to leverage your firms’ approach to this issue.

It is estimated that approximately £100 billion is laundered every year in the UK, and £1.8 trillion on a global scale. How are you ensuring your firm isn’t unknowingly processing dirty money?

Spearheaded by the SRA, the Legal Sector Affinity Group (LSAG) is comprised of all of the UK’s AML legal sector supervisors, and is considered to provide the definitive guidance for AML for the legal sector.

LSAG advises that, “A practice must scrutinise transactions on a matter-by-matter basis, with the objective of understanding what the source of funds are for transactions you undertake on behalf of a client. It is important to remember that understanding the SoF and SoW is a key protection for your practice, and it should be approached as an opportunity to protect your practice from being used for money laundering.”

LSAG confirms that fundamental to any assessment of client risk is an assessment of whether the following three elements align with the background and wider profile of the client:

• Financial circumstances
• Main business activities
• Source of wealth and source of funds

Source of funds is a key element of CDD, as the movement of funds is the fundamental aspect of money laundering. Understanding the client’s financial circumstances is paramount to determining what further information is required.

What is your firm’s approach to source of funds?

The SRA are criticising law firms for not recording source of funds on files. In fact, one quarter of policies didn’t even deal with source of funds checks during an SRA audit.

Collecting source of funds evidence can be a time consuming, lengthy process that potentially exposes law firms to the risk of money laundering if not conducted properly.

For instance, how would you firm deal with the return of unsolicited or apparently accidentally deposited funds?

Legl helps firms navigate this potential AML issue by providing payment request links that specify the exact amount – thus avoiding over or underpayments. As part of the payment steps with Legl, these pre-filled links contain the information required to reconcile the payment easily.

How can Legl help firms to manage source of funds?

With Legl, firms can reduce risk of money laundering through quick and efficient source of funds checks when taking client payments or managing transactions.

Legl’s source of funds checks contain a simple, comprehensive questionnaire to gather evidence in minutes, and cutting edge open banking technology to securely and automatically gather clients’ supporting bank statements.

De-risk client payments

Get comprehensive evidence directly from clients’ bank accounts. Fetch 6 months’ worth of transactions in seconds.

Reduce client touchpoints

Offer a seamless client experience combining source of funds alongside payments and due diligence workflows, removing the need for any back and forth chasing information.

Get the data you need

Review bank transactions alongside the completed SoF questionnaire, and easily see all the information you need for your AML processes in one place.

Real-time ongoing monitoring

Automate risk monitoring alerts of any changes to clients’ AML status for the duration of your business relationship, and stay fully compliant with regulatory requirements.

Use tech as a tool - not as a silver bullet

A quote from the recent SRA conference sums up AML well: “Risk is not a data point, it’s a network.” Firms’ risk processes are best treated as an art and a science, marrying robust technology like automated source of funds with the hard work of their highly skilled and vigilant staff.

Forward-thinking law firms are using a combination of technology tools and in-house expertise to determine risk, and it’s this powerful collaboration that enables firms to become fully compliant.

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