Around the world, law firms of all sizes have taken on different approaches to how they manage their risk and compliance obligations. The irony is – some of these approaches have associated risks as well.
As your firm considers its approach, here are some points to keep in mind to ensure your risk and compliance efforts fall within your firm’s comfort zone.
Centralized or decentralized?
This dilemma has been a question many law firms have wrestled with over the past few years – weighing the pros and cons of such a change to internal operations – ultimately challenging the status quo. There are many case studies that can help firms make this decision.
One of the most common pros of centralization is reducing operating costs by setting up a shared services center in cost-effective jurisdictions. This approach can also have the added advantage of enabling lawyers to have access to a pool of risk professionals across multiple time zones. The cons have historically tended to be the lack of willingness to disrupt risk and compliance activities and expose a firm to potential financial loss, compliance failure, or reputational damage.
There are many options on the market when it comes to choosing a client onboarding tool but choosing the right one is not always straightforward. When it comes to selecting the ‘right’ solution for the job, firms need to identify what they want to achieve from the new solution and then determine if it can help them do that.
If, for example, a firm has put forward a business case intending to improve the capture of risk and compliance information, then the chosen solution should be able to demonstrate the ability to meet those needs, and in a way the firm envisages. Consideration should be given to available options within the firm’s current practice management system as well as from market-leading software providers such as Intapp and business process specialists such as K2.
Medium and large law firms face many challenges as they grow – particularly those that expand geographically. There are nearly 300 jurisdictions internationally. Understanding and keeping track of regulations across these jurisdictions for international practices can be challenging and time-consuming. Scaling up in-house teams of risk experts to accommodate a firm’s compliance needs and having access to those experts across multiple time zones can also be a considerable burden on firms.
There’s an expectation from lawyers that their KYC (know your customers) and AML (anti-money laundering) checks will be completed with minimal disruption to their work and the onboarding of new clients. With increasingly stringent compliance regulations and the need to keep costs down for clients in a price-sensitive and competitive marketplace, in-house experts are under increased pressure. Could outsourcing complex KYC and AML obligations to a dedicated professional third-party be the answer? In recent years we have seen the emergence of AML and KYC specialist companies, from small to large cross-sector providers, but also other professional services firms, such as accountancy firms. In many cases, they offer bespoke services to law firms allowing them to focus on what they do best – practicing the law.
As firms grapple with risk management challenges, there are a number of options worthy of consideration for overcoming them. As in the past, firms will undoubtedly continue to look to their peers for guidance and success stories. But ultimately, making the right decision is a matter of firm choice – what will fit for them strategically, culturally, and of course, what represents value for money.
If you’d like to learn more about how Wilson Allen can help you review your current business processes or select the right solution for your client onboarding and compliance needs, please contact us. Also, visit our events page for details about the upcoming webinar: Evolving Law Firm Risk: Inside the Minds of Clients & Firm Management.