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Deconstruction of legal matters – Due diligence

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While due diligence has various meanings in a legal context, we will just look at the due diligence required of UK law firms by the regulator, the Solicitors Regulation Authority. This is pervasive of all matters opened by law firms and is aimed at reducing criminal activity, such as money laundering or terrorist financing.

It’s important for law firms to ascertain who their clients are, especially if there is no face-to-face meeting. For leading firms this could be as a result of a referral from a foreign firm, or a client that is not domiciled in the UK. Whether there has been a face-to-face meeting or not, law firms are still under an obligation to identify their clients and verify they are not blacklisted or politically exposed.

Law firms’ assessment of client risk becomes an exercise in data collection and verification. Those involved with carrying out due diligence will need to gather information on their client’s identity if a personal client, and for corporate clients those with significant control over the control need to be identified. They will then determine whether a lawyer within the firm can accept instructions from that client or not.

Assessing clients’ credentials is usually done by searching platforms like World-Check, but a human operator is still currently required to assess the information received. From experience, private practice lawyers see those people that carry out this type of work as blockers. Lawyers have a perception that those carrying out due diligence are slowing down the process and are an obstacle to carrying out their new client’s instructions.

So how can technology help?

The key benefit will be to speed up the process of due diligence so those in risk roles are able to come to a decision quicker, with the minimum possible impact on the lawyer or their client.

Following on from my previous article on instruction it would make sense that the same chat bot type functionality could benefit due diligence too. It could ask the client questions and allow them to upload documents without any human interaction.  Through decision tree and workflow (or even artificial intelligence) the information received from the client could be assessed and the appropriate person notified based on risk level.

That information could then automatically feed straight into the databases that are usually used to search for client information. This integration could mean that the manual inputting of data is reduced and those risk personnel can assess the relevant information quicker.

If successful, the end result of the workflow would then be that those involved with the matter are notified that they can accept instructions, the matter in the document management system is opened with all uploaded documents added, and a first meeting organised automatically.

Systems like this I am sure exist already but perhaps not with the same level of integration or automation. There is a clear benefit in making the process of data collection and assessment as seamless as possible, which makes it as easy as possible for all concerned. 

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