By Legal Futures Associate Lawtech Software Group
Money laundering remains a substantial threat to the UK economy, with an estimated annual cost of £100 billion. The government’s response comes in the form of a three-year, £400 million Economic Crime Plan, aiming to address gaps in fraud prevention, anti-money laundering (AML), and related areas.
The plan pinpoints four potential models with a preferred choice expected to be made before the end of Q1. The new legislation coming into place aims to the tackle the issues head on which will be welcome news for the legal industry.
Identifying the weaknesses
The Financial Action Task Force (FATF) report several years ago highlighted vulnerabilities in the UK’s AML and counter-terrorist financing (CTF) processes, especially in supervising the professional services sector, a significant contributor of 8.3% to the country’s economic output.
The FATF’s evaluation deemed the UK’s AML/CTF supervision regime “moderately effective” but flagged significant weaknesses in the risk-based approach across supervisory bodies, except for the Gambling Commission, which received commendation. Subsequent reports highlighted inconsistencies in enforcement powers and information sharing gaps.
The UK’s AML consultation propelling the changes
In response to identified weaknesses, the UK government has initiated a consultation to explore potential new regulatory frameworks for AML and CTF supervision. The aim is to secure the UK’s financial sector against money laundering and terrorist financing. Compliance teams hold a crucial role in understanding evolving AML legislation and maintaining system integrity.
Four models designed to combat AML/CTF supervisory
In response to the FTAF report, the UK government has begun restructuring its AML and CTF supervisory regime.
Following those discussions, the government has introduced four potential reform models to reshape AML/CTF supervision, address complexities and heightened risks associated with financial regulations and sanctions.
- Model one enhances the existing Office for Professional Body Anti-Money Laundering Supervision (OPBAS+) with additional tools.
- Model 2 streamlines AML/CTF supervision by reducing the number of professional body supervisors.
- Model 3 suggests a Single Professional Services Supervisor (SPSS).
- Model 4 envisions a Single Anti-Money Laundering Supervisor (SAS).
This new legislation can only be seen as good news for the technological advancements being made in the law sector.
Lawtech software ‘Verify 365’ tackles AML compliance problem
Amidst the AML concerns and imminent legislation changes, law firms will be looking to ensure they are ready to face compliance changes. Legal technology will play a role in this and Verify 365 is a solution designed to tackle the problems.
Law firms across the UK regularly deal with AML concerns but with the new regulations, experts suggest they should focus on utilising innovative new technologies such as ‘lawtech digital eco-systems’ to enhance risk screening and fraud prevention’ to tackle the problem.
Verify 365’s UK developed ‘DynamicID’ verification software is a NFC powered tool integrating advanced biometric technology sits at the core of its solution as part of the client onboarding journey the platform takes clients through. The aim being to combat ID fraud and complete a fast and secure client check, instantly verifying identity and checking source of funds documents
This solution operates within the global legal market’s regulatory landscape, catering specifically to the AML needs of international law firms. By incorporating Verify 365 law firms can operate a reliable means to conduct thorough client due diligence whilst also improving operational efficiency. The digital onboarding solution now covers ID, address, source of funds, client intake, payments, digital eSignatures and a one-click integration with case management systems.
Verify 365 Director Azeem Rashid expressed optimism for the changes, “In light of the positive strides in the AML consultation, Verify 365 is positioned to be a game-changer. It’s important that firms make use of the ‘right’ technology when it comes to compliance, as client ongoing monitoring and document verification can be difficult to maintain without verification systems that are tailored to address the stringent AML concerns faced by law firms.”
