Following up on their session about how legal tech can help with regulatory requirements at our Annual Conference in April, here Olly Thornton-Berry Managing Director from our sponsors ThirdFort explains the advantages of open banking.
Open Banking, though backed by the government, is still relatively new technology, which can leave some wary about adopting it or simply in the dark to its benefits. Within a legal context, Open Banking can make obtaining bank statements a smoother, more secure process for both lawyer and client, eliminating the risk of bank statements being falsified or doctored. Money laundering costs the UK economy £37 billion every year (National Crime Agency). With money laundering posing a huge risk to the legal profession, reliance on paper bank statements is leaving lawyers exposed to fraud in a time when this simply isn’t necessary. The right tech is out there, so how can it help?
Open Banking has been set up by the Competition and Markets Authority on behalf of the UK Government. Linklaters’ report with Microsoft describes Open Banking as such:
“At its core, open banking generally relies on application programming interfaces (APIs) — the bridge that makes it possible for two systems to talk to each other and share data — to give consumers the right and ability to port and share their financial data with third-party providers and other financial institutions”.
So users and providers can be sure of its security, any provider that uses Open Banking must be regulated by the Financial Conduct Authority (FCA) or the European equivalent. Currently, a number of the UK’s leading banks offer Open Banking capabilities to their customers.
So, how can this initiative help lawyers stay secure?
For starters, Open Banking connects securely and directly to the clients’ chosen bank account to retrieve up to 12 months of bank statements, so lawyers know this is genuine and from a trusted source. In addition, Open Banking removes the need for clients to send sensitive documents like their bank statements via post, where they can be intercepted by fraudsters, so it is safer for the client themselves, too. The fact that bank statements can be retrieved through Open Banking almost instantly, means a more positive experience for lawyers’ clients, and more time for lawyers to complete work that adds value. At Thirdfort, we’ve seen Open Banking technology cut onboarding times down from 2.5 weeks to just 3 days.
Open Banking also eliminates the chance for fraudsters to tamper with documents or produce fake statements. A quick Google search brings up numerous websites offering to produce fully customisable fake statements for as little as £20. These can be of incredibly high standard, and so difficult to spot. Lawyers are stretched to capacity with the pressure of the pandemic as it is, and very few can afford the time/expertise it would take to manually authenticate these documents. The most efficient way to combat this is with a robust AML process around source of funds.
At Thirdfort, we’ve seen use cases in which our Open Banking process, coupled with a source of funds questionnaire, has acted as a deterrent for unscrupulous law firm clients.
A Thirdfort client recently notified us of an instance in which their use of Open Banking weeded out one suspicious client. The client intended to buy a property in all cash and had been vague about the source of their funds, claiming they were from crypto-trading. When asked to provide bank statements via Open Banking, the client refused, claiming he had poor connection and would send over paper statements instead. These turned out to be fake statements. The clients’ resistance to carrying out Open Banking raised the lawyers’ suspicion and indicated that they should be extra-cautious when viewing the clients’ statements.
To conclude, Open Banking can be an incredibly useful weapon for lawyers, particularly conveyancers, to add to their arsenal in combatting fraud and money-laundering. In today’s climate, criminals will take advantage of any gap in firms’ armour. Where firms can automate processes to make them more secure, they should - or be at risk of becoming an easy target. Open Banking, like most legaltech on the market, offers firms more security, more positive client experience, plus their time back.
Thirdfort uses Open Banking to carry out smooth, secure source of funds verification for over 500 firms and counting. Want to know more? Visit www.thirdfort.com for more info.