Client intake has long been a fraught task for law firms. Bringing on new clients and verifying their identities and motivations is a vital yet often slow and unbillable activity. Today, increased competition, enhanced regulations, stricter anti-money laundering laws, greater awareness of ethical ramifications and a culture of immediate answers is making it more complex than ever.
Although there are more challenges and hoops to jump through than in the past, law firms have at their disposal more technology than ever before. If leveraged strategically, this technology can help them create efficient and seamless client intake systems.
This article will set out some of the key challenges in the legal client intake progress and offer ways to resolve them using Xapien’s automated background checking software.
Why client intake matters
It is essential law firms verify the identity and history of potential clients. This is in part due to increasingly wide ranging Anti-Money-Laundering and sanctions regulation. This can be a time-consuming and resource-intensive process, but it is necessary to ensure that the firm works with legitimate clients and avoids any potential legal or ethical fallout.
Law firms must be careful to avoid working with clients or cases that could present a conflict of interest. A lawyer might have represented the other side in the past, or the client might have problematic connections to existing customers or their subsidiaries. Laws and regulations change and new conflicts may arise, creating a need for constant research.
However, the potential client’s legal compliance is no longer the only consideration. The effect they could have on a law firm’s reputation also needs to be scrutinised. Law firms have long acted for clients involved in controversies from environmental disasters to human rights abuses. However, firms are increasingly considering the ethical implications of accepting new clients, which lengthens the client intake process.
Thorough investigation into a potential client takes time when it is done by humans. Law firms are often competing against one another to win new business, so delays in the client intake process can lead to a loss of revenue to other firms, particularly if the potential client feels as though there has been a lack of, or too much, back and forth communication, as part of the onboarding process.
This can also lead to tensions between partners and compliance teams. Partners may be eager to win new business and bring in new clients, while compliance teams want to ensure the firm is following all relevant laws and regulations. Disagreements and further delays in the client intake process can follow.
Client intake requirements:
A shifting landscape
Russia's invasion of Ukraine in 2022, the 2021 Pandora Papers, the 2017 Paradise papers, and the 2016 Panama Papers spurred governments on either side of the Atlantic to hold lawyers more accountable for the actions of their clients. Regulators are being endowed with greater funding and investigatory powers, while public awareness of global corruption is on the rise. It has never been more essential for law firms to have the full picture on potential clients.
The United Kingdom recently created a beneficial ownership registry and the introduction of unexplained wealth orders. In January, an amendment was introduced to the Economic Crime and Corporate Transparency Bill that would create an offence of ‘failure to prevent’ fraud, false accounting, or money laundering for commercial organisations. The bill, which follows Economic Crime (Transparency and Enforcement) Act of March 2022, is in the process of passing through the House of Lords. These measures will require suspected criminals and corrupt officials to provide a clear explanation for any assets that appear disproportionate to their income.
The European Union is also taking action to address financial crime, with plans to introduce a directive providing procedural safeguards against strategic lawsuits against public participation, commonly known as SLAPP suits or intimidation lawsuits.
Many countries are also taking steps to crack down on golden visa programmes that allow oligarchs and other wealthy individuals to gain European citizenship.
In the United States, the anti-money laundering Enablers Act was held up by the Senate in December, but is expected to be passed through alternative means. It will require lawyers engaged in financial activities or who set up a business for a client to conduct due diligence and file Suspicious Activity Reports with the government.
Canada has also pledged to fast-track the implementation of its beneficial owner registry, further demonstrating the commitment of governments around the world to combat financial crime.
The TLDR: Laws, including anti money laundering legislation, and sanctions are constantly evolving
Due to the rapidly changing nature of sanctions and anti-corruption laws, compliance has become increasingly complex. Thorough vetting processes are needed to ensure a potential client is a suitable match. This can be time-consuming and laborious, involving teams of researchers spending days reviewing public information and conducting interviews, as well as verifying findings through additional research using PEPs and sanctions screening tools. This not only creates a negative first impression, but also wastes both the client’s and the law firm’s time.
Automating the repetitive parts of the legal client intake process enables law firms to conduct deep due diligence, make decisions quickly, and remain within budget. When Xapien’s automated online research platform is used for client intake, speed increases, inaccuracies are removed, and lawyers gain a deep understanding of potential clients’ reputations, backgrounds and objectives. Xapien is a single tool that can solve multiple challenges by transforming client research from a resource-intensive task that takes days into one that takes only minutes and can be done by anyone.
Xapien makes it easy to stay abreast of changing regulatory landscapes. It runs searches on PEPs and sanctions databases, news and media articles, corporate records and wider internet data from sites such as LinkedIn, Wikileaks, offshore leaks, and more. It identifies key networks and affiliations that enable lawyer firms to be aware of clients who are likely to be added to sanctions lists in the future, helping them stay ahead of potential risks. For example, someone might not be directly sanctioned, but could be mentioned in media articles as a ‘close friend’ of a sanctioned figure. Traditional sanctions checks would not flag these risks.
Lower risk: Law firms can see the full picture on any potential client in under 20 minutes
Increased productivity: Lawyers can focus on complicated tasks, rather than reviewing contracts and performing due-diligence processes
Reduced costs: More work can be done with fewer workers
Better client experience: Law firms operate more quickly and efficiently
Better compliance: The possibility of human error is reduced
Read in depth: Legal intake challenges, and how Xapien solves them
Clients’ identities, backgrounds and networks need to be verified and checked for conflict
Law firms need to know as much as possible about potential clients so that they can ensure they are a good fit legally and ethically. They need to know not only if they have been sanctioned or are politically exposed, but if they could be soon, or have close relationships with other entities who are. But they also need to be checked for conflicts across other parts of the firm.
A lawyer can be fined or debarred from practising for failing to disclose a conflict of interest. They can also be sued for not disclosing such a conflict to a client.
When there are multiple parties involved in a case, such as during a merger and acquisition, when 30 entities or more can be on a cap table, conducting thorough background research manually is all but impossible.
A lawyer from the firm might have represented the other side in a previous case, or existing clients might be in conflict. Or, information might be uncovered that suggests a prospect is unsuitable, but further investigation is needed to be sure. Sometimes this happens after significant time has already been invested in the client. The law firm can either spend even more time investigating, or cut their losses and reject the client.
Xapien processes and delivers insights on all the information available in the public domain on an individual or a business in under 10 minutes. Law firms can check whether potential clients are suitable as soon as they approach the firm, bringing to an end wasted onboarding efforts.
Laws firms can be confident they know as much about a client as is possible. By applying Natural Language Processing Xapien can take just a few pieces of information, such as the name of a person and their organisation, to extract key events, sentiments and personas related to them. It then builds a ‘knowledge graph’ connecting individual pieces of information together. This creates a rich view of the subject and their network of connections, in the same way a human researcher would, but far more quickly.
Case study 1:
How Xapien helps a law firm onboard a new client
A potential client asks law firm A to represent them in a merger.
Law firm A’s compliance team looks up the client using PEP or sanctions lists and finds nothing problematic. Further checks on search engines, using keywords such as ‘fraud’ and ‘corrupt’ reveal no problems. The process takes a day.
The client also approaches Law firm B (firm A’s major competitor). Law firm B uses Xapien to learn about the client. Xapien’s analysis of open-source data uncovers news reports showing the client is believed to hold assets on the Russian president’s behalf. The search took seven minutes.
Law firm A has no awareness of this potentially harmful information. If it onboards the client and the merger takes place, its reputation could be gravely damaged. Law firm B can make an informed decision about taking on the client, and prepare rebuttals for negative reactions.
How Xapien solved the problem
When you enter a person or business’s name into Xapien’s search engine, it searches through existing datasets, from PEPs and sanctions lists to corporate records, as well as scouring the entire web and deriving insights from open-source information. It can process over 133 languages.
Once it has scanned millions of data points, it flags anything that might be considered a potential risk. These risks are easily missed due to language barriers or time constraints.
Beyond regulatory and reputational risks, the insights generated can help the firm decide if the prospective client is a mutual fit with the firm.
Case study 2:
Xapien facilitates enhanced due diligence at rapidly scaling fintech startup, Griffin
At fintech company Griffin, a prospect or supplier is run through Xapien as soon as their name is mentioned. Inputting the search terms takes 30 seconds. Compliance can leave the software to run while they get on with other tasks. The results are available in 12 minutes or less. Compliance takes half an hour to read the results. Direct risks are highlighted, so compliance can skip the irrelevant information. Xapien provides clear evidence of a due diligence process.
How Xapien solved the problem
With Xapien’s automated research platform, compliance can complete due diligence research within an hour. Previously, it took more than a day. The sales team at Griffin can go into meetings equipped with an in-depth understanding of the prospect, confident that a red flag should not emerge after they have started working with a prospective customer. This creates positive relationships between the first line business development team and second line compliance team.
Case study 3:
Faster, safer donations due diligence at the University of Cambridge
A prospect who offered to make a five-figure donation to the University of Cambridge was checked on Xapien. The search revealed they worked for a firm that had in the past invested in fossil fuels. However, that investment branch was closed.
Without the depth of information and quality of risk analysis provided by Xapien, the prospect would have needed to be investigated further, or been rejected. Instead, the Xapien reported provided all the information needed to proceed with confidence.
Without Xapien: Client intake is delayed, creating internal tensions and putting off clients
Manual research is a slow process, leading to delays in client onboarding and client communication, often prompting them to turn to another firm. This often creates tensions between partners and the compliance department. Or, due diligence is rushed, resulting in missed red flags. This can lead to reputational damage, media scrutiny and serious financial consequences.
How Xapien solves the problem
With Xapien, anyone can quickly generate comprehensive, easily readable reports on an individual or company within minutes. This allows compliance teams and partners to quickly obtain the information they need without overwhelming potential clients with excessive questions. They can make informed decisions about accepting clients, aware of any potential risks, even those that they might not have thought to look for. The result is a streamlined onboarding process. Clients can become billable within a half hour.
Harness AI today
For your experts, lawyers and researchers, the best part is that Xapien frees them up to spend more time working out how to win – not drowning in data.
To see how Xapien’s AI platform can transform litigation support at your law firm today, book a demo to see Xapien’s powerful tools in action.