The last six months have seen increasing regulatory action from the Solicitors Regulation Authority (SRA), which has been actively issuing fines, particularly for breaches of anti-money laundering (AML) regulations. Backed by recent changes granted to them by the Economic Crime and Corporate Transparency Act 2023, the regulator now has the power to impose unlimited fines for rule breaches related to economic crime, and this has been transforming the financial consequences of regulatory breaches.
Failings in AML policies, controls and procedures are still dominating the reasons for firms facing financial penalties from the SRA. Some of these most recent reasons fines are being imposed include failures to conduct proper client and matter risk assessments, maintain compliant policies, or apply correct Enhanced Due Diligence (EDD) and source of funds checks. However, many firms are still relying on fee earners and support staff to manually complete Client Due Diligence (CDD) and Client or Matter Risk Assessments, often without the necessary training, time, or correct policies, controls and procedures (PCPs) in place.
Due to the growing scrutiny from the SRA, it is essential for firms to appreciate the importance of their Due Diligence and Matter Risk Assessment procedures. These processes are not just best practice; they are legal obligations that form the backbone of a firm’s AML framework. Unfortunately, it is often these procedures that many firms struggle to get right, or staff do not fully understand how to complete an assessment correctly, what to look out for, and when, for example, to apply Enhanced Due Diligence.
Why Are In-House Risk Assessments Failing Firms?
For most firms, the reality is that in-house CDD or risk assessment processes are frequently fragmented. Fee earners are expected to complete the necessary client due diligence checks, collect and verify documentation, understand when to apply Enhanced Due Diligence (EDD), and assess client and matter risk. This, all while managing their day-to-day tasks or caseloads. Although many firms assume that utilising in-house staff is more cost effective, this approach not only introduces risk, but also takes up valuable time that could be dedicated to client care or billable work.
At the Regulation and Compliance Office (RACO), our compliance officers have seen firsthand how firms struggle to maintain consistent compliance procedures across their AML obligations. We often see cases where EDD triggers are missed, source of funds checks are applied incorrectly, findings are inadequately documented, and various other regulatory obligations and training gaps that expose firms, their staff, and clients to risk and regulatory scrutiny. These oversights are precisely what the SRA has been targeting.
Fully Outsourced Support for Due Diligence & Risk Assessment Service
Because of this, we have designed a service that provides law firms with a seamless, fully outsourced solution for Client Due Diligence (CDD) and Risk Assessments.
Our Due Diligence and Risk Assessment Service has been designed to enable law firms to focus on the provision of their legal services while we collate the necessary documentation for Due Diligence, Enhanced Due Diligence (where needed), and completion of the Client and Matter Risk Assessment, which must be completed on all matters in scope of the Money Laundering Regulations 2017.
Why Choose Our Service?
Firms that have outsourced their CDD and Risk Assessments to RACO are benefiting from:
- Comprehensive Due Diligence – We collect, verify, and assess all necessary documents, including KYC and AML checks.
- Risk Assessment Support – We prepare the Client and Matter Risk Assessment for fee earners to review and approve.
- Seamless Integration – We work with your firm’s existing AML processes, ensuring compliance without disruption.
- Cost-Neutral Approach – Our service fees can be passed on to clients as part of your legal fees.
What’s Included?
- Collection of KYC documents (Photographic ID & Proof of Address)
- Access to your Electronic AML Provider for requesting AML checks
- Companies House checks for Ultimate Beneficial Owners (UBOs)
- Ongoing monitoring & Enhanced Due Diligence (EDD) where needed
- Client risk assessments & detailed reports for fee earners
How does it compare?
| Feature | In-House CDD & Risk Assessment | Outsourced via RACO Service |
| Time Efficiency | Fee earners manually collect and verify data. | RACO handles collation, verification, and reporting, freeing up fee earner and admin time. Most firms report a time saving of an hour per case, freeing up resources to focus on other areas. |
| Compliance Accuracy | Varies by team knowledge and workload, limited by experience and understanding of regulations. | Focussed expertise that understands the regulations and applies them in a consistent and compliant way. |
| Access to AML Checks | Requires internal access and training and understanding of obligations. | RACO uses your AML provider to perform checks, carried out by compliance experts. |
| Source of Funds Checks | Often inconsistently applied. | Systematic collection and reporting included. |
| EDD Identification | May be missed or delayed | Proactively flagged and escalated. |
| Reporting & Documentation | Fee earners prepare and review manually. | RACO submits completed risk assessments for review. |
| Cost Management | Internal costs and overhead. | Transparent pricing, passed to client, cost neutral. |
| Client & Matter Risk Assessment | Usually inconsistent or incomplete. | Tailored, documented and regulator aligned. |
| Scalability | Limited by staff availability and training. | Easily scalable across multiple matters. |
For full details on our service, including requirements and processes, download our brochure:
Due Diligence & Risk Assessment Brochure.
Useful Resources
The Law Society: Guidance on Customer Due Diligence.
Detailed Risk Management and Compliance Review.
