Posted by Yazad Bajina, director at Legal Futures Associate Checkboard
Bajina: Document fatigue
Are we suffering from a crisis of clarity?
The SRA recently asked for the government to provide more clarity on source of funds checks in light of growing uncertainty and an increasing rate of non-compliance.
The regulator identified client reluctance to share financial information due to privacy concerns and hesitancy among firms about “offending long-standing clients” as significant barriers. And despite generally high rates of compliance, the Solicitors Regulation Authority (SRA) found that 11% of case files did not contain any checks in 2024–25.
The review also found that source of funds checks are often required even if no money is being transferred through the client account.
It raises some valid questions about the scope and scale of the AML and source of funds checks imposed upon law firms. Perhaps many firms are simply finding them too confusing, too vague, and too much of a burden.
Compliance fatigue
The result may be that we’re all suffering from a kind of ‘document fatigue’ that means firms view compliance as a burden rather than a responsibility, something that blocks business rather than boosts it.
It comes as no surprise: every day, law firms need to assemble a growing stack of documents and checklists just to meet their compliance obligations, while the change in regulator and constant talk about lightning the regulatory burden is adding to the uncertainty and the confusion.
You might not be surprised to learn that Checkboard, as a compliance and onboarding solution, is generally a big supporter of due diligence.
It isn’t just self-interest on our part: money laundering is a major threat to the UK economy, and the government identified legal and professional services as a significant enabler of money laundering in its annual National Risk Assessment.
With tens of billions of pounds laundered each year through the UK economy, the scale of the problem is clear. Firms need to view AML and source of funds checks as a responsibility, and as something that protects their bottom line from fraud, rather than as a tick-box exercise.
Clarity is urgent
But the government and the Financial Conduct Authority need to do something, too. If firms are buckling under the pressure of regulations, subject to ever-increasing fines, then something is clearly not working as it should be.
It could well be that all the government needs to do is keep things simple, to strike that balance between performance and compliance, and to provide the all-important clarity firms need to keep up with the regulations.
As the SRA report reveals, too many law firms simply don’t know when they’re supposed to perform source of funds checks. This has the effect of lowering the rate of compliance, and opening firms, clients, and the wider economy up to a greater level of risk.
With money launderers devising ever-more sophisticated ways to break through the defences, that clarity is a matter of urgency.
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