By Legal Futures Associate Checkboard [1]
When the SRA released its 2024–25 AML report last October, it highlighted source of funds [2] as a key area of improvement.
It noted “failure to notice that the client’s source of funds did not match the account they gave” and “incorrect recording of client funds, such as cash misdescribed as mortgage monies,” as particular recurring issues.
With exposure to criminal risk and hefty fines as possible consequences of inadequate due diligence, understanding the source of funds for every transaction isn’t just procedure, but an opportunity to protect your firm.
Automating your source of funds checks is the key to avoiding unwelcome regulatory scrutiny – and that’s where Checkboard steps in.
Why is source of funds still so important?
In every transaction, understanding the source of funds can be the difference between inviting fraud risk and eliminating it.
Failure to spot suspicious transactions or unusual transactors, or even to obtain evidence of the source of funds, can put firms at risk of fines and criminal proceedings under the Proceeds of Crime Act 2002, and consequently of significant reputational damage.
Firms, therefore, need to have processes in place to ensure that the funds used in any transaction are legitimate.
Even though the risks are clear, the SRA found that many firms still aren’t doing their due diligence. Of the 5,000+ files they reviewed that required source of funds checks, ten per cent of them didn’t contain any source of funds checks.
Other firms had received bank statements without understanding the origin of those funds, or had gathered source of funds information that didn’t match the information contained on the ledger, without querying why that was.
How Checkboard helps your source of funds checks
Law firms need to perform source of funds checks as second nature.
It should be understood not as a regulatory burden, but as an opportunity to protect your firm from being used for money laundering, or to provide legal legitimacy to crooks.
Automating source of funds checks through Checkboard is safer, more secure, and more verifiable.
We use open banking, rather than uploaded or scanned bank statements (which can be fairly easily tampered with), for a far more reliable approach.
Furthermore, enhanced data insights generated through our relationships with the likes of Equifax and LexisNexis, including an individual’s credit report, enable near-foolproof identity verification.
All this is done quickly and automatically. It turns source of funds checks from onerous labour into one smooth, seamless workflow. In short, it becomes second nature.
This, in turn, satisfies the regulators. But more importantly, it significantly reduces your exposure to criminal risk and prevents your firm from being abused by launderers.
For faster, better, more secure source of funds checks, get in touch with Checkboard now [3].