Deconstruction of legal matters – Due diligence

While due diligence has various meanings ina legal context, we will just look at the due diligence required of UK lawfirms by the regulator, the Solicitors Regulation Authority. This is pervasiveof 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 ascertainwho their clients are, especially if there is no face-to-face meeting. Forleading firms this could be as a result of a referral from a foreign firm, or aclient that is not domiciled in the UK. Whether there has been a face-to-facemeeting or not, law firms are still under an obligation to identify theirclients and verify they are not blacklisted or politically exposed.

Law firms’ assessment of client riskbecomes an exercise in data collection and verification. Those involved withcarrying out due diligence will need to gather information on their client’sidentity if a personal client, and for corporate clients those with significantcontrol over the control need to be identified. They will then determinewhether a lawyer within the firm can accept instructions from that client ornot.

Assessing clients’ credentials is usuallydone by searching platforms like World-Check, but a human operator is stillcurrently required to assess the information received. From experience, privatepractice 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 downthe process and are an obstacle to carrying out their new client’sinstructions.

So how can technology help?

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

Following on from my previous article oninstruction it would make sense that the same chat bot type functionality couldbenefit due diligence too. It could ask the client questions and allow them toupload documents without any human interaction.  Through decision tree and workflow (or evenartificial intelligence) the information received from the client could beassessed and the appropriate person notified based on risk level.

That information could then automaticallyfeed straight into the databases that are usually used to search for clientinformation. This integration could mean that the manual inputting of data isreduced and those risk personnel can assess the relevant information quicker.

If successful, the end result of theworkflow would then be that those involved with the matter are notified thatthey can accept instructions, the matter in the document management system isopened with all uploaded documents added, and a first meeting organisedautomatically.

Systems like this I am sure exist alreadybut perhaps not with the same level of integration or automation. There is aclear benefit in making the process of data collection and assessment asseamless as possible, which makes it as easy as possible for allconcerned.