hiverisk aml compliance audit

PII renewals

The latest session of Compliance for Law Firms featured a discussion around maximising the effectiveness of PII proposal submissions and and strategies to best present your firm’s approach to risk. The following is a brief summary of some of the areas explored.

Preparing to submit a PII renewal form

The session began with some general discussion around the proposal form, acknowledging whilst it can seem that there isn’t always enough space to write as much as you’d ideally like, it was important to convey to the underwriter a brief history of the firm, the firm’s current position and future aspirations. This flavour text can provide much valuable context along with the more ‘nuts and bolts’ facts and figures you’d include as standard.

Creating a narrative about your firm

The session also highlighted the importance of ‘telling a story’ to show awareness of the kinds of risks your firm might encounter; this might be acknowledging high-volume conveyancing, recognising and red-flagging last minute change of account details, awareness of imposter. This along with outlining the combined number of PQE amongst staff to show experience, this isn’t necessarily limited to solicitors and legal executives as often senior and essential staff add significant value to the firm and strengthen the firm’s risk positioning.

This can improve the optics of the presentation e.g., if a firm says the majority of the work is being handled by a team of 12 with only 2 solicitors, this might raise concern, but time taken to outline the combined experience and expertise of those 12 fee-earners this concern may dissipate in the eyes of the underwriter.

Without context insurer admin teams may dispassionately pre-populate their system with figures like largest transactions, average transaction values, number of cases handled etc and these can trigger risks within the system before it even reaches the underwriter, pre-emptively clouding their view.

Mergers and how to approach them

The discussion then moved onto the prevalence of mergers that the law firms are seeing and how best to approach them from a PII perspective. Firm’s should elaborate upon the motivation for the merger and is it an acquisition or a true merger?

Brokers, when approached, can offer early insight into the firms you’re considering acquiring or being acquired by. They might be able to share some information from existing knowledge of the target firm. There was discussion around the importance of drafting a profile document of how the new firm will look (practice areas, fees head-count etc) once merged so the broker can advise on how the new firm will be viewed, whether certain insurers won’t provide cover and how the new structure will impact on a firm’s risk profile. It was acknowledged that there had been a number of recent mergers, some of which proceeded without enough due-diligence which has resulted in huge financial implications for some firms both in terms of run-off and staff retention issues with roles being accidentally duplicated or apportioned between firms incorrectly.

Axiom Ince as a cautionary tale

As a closing aside, the session referenced the recent high-profile fraud at Axiom Ince and whilst it was deemed unlikely that insurers would begin to mandate minimum counter fraud requirements, it did reinforce the need for robust internal security and due diligence both dealing with staff and external clients. The session highlighted the importance of ensuring staff are au-fait with ID checks, biometric checks etc and that their workload isn’t such that they’re under time pressures rendering them unable or unwilling to perform routine AML checks.

As this was a closed session subject to Chatham House Rule, many of the valuable insights and detail cannot be reported publicly. For the full ‘Compliance for Law Firms experience’ – attendance at these sessions is a must! Get in touch.

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