As the world becomes increasingly digital, we're seeing more and more opportunities for technology to improve our lives, whether that be for your bank account, savings account, and many other forms of acccount information. One such opportunity is open banking, which involves the sharing of banking data between banks and third-party providers.
This can provide all sorts of benefits for consumers and businesses alike, including reducing fraud and compliance risks for payment services. For law firms, open banking could be a huge boon, as it could help them streamline their operations and improve their bottom line. In this post, we'll take a closer look at how open banking can benefit law firms.
In the wake of numerous financial scandals in recent years, the legal industry has been under increased scrutiny regarding money laundering and fraud. Banking and financial crime for the accountancy and legal sectors costs the economy approx. £37bn a year, according to the National Risk Assessment 2020. It's no surprise that regulators are cracking down on firms that don't take measures to protect themselves within their financial information and banking information additionally.
Late in 2021 a Top 100 law firm was fined £232,500 plus an additional £50,000 of costs by the SRA, for serious breaches of money laundering rules back in 2016. This is one of the largest fines on record for a UK law firm, almost double the previous record of £124,436.
One way that law firms can reduce their risk of fraud is by using open banking technologies for source of funds checks, data and payments. So, how digital verification of funds (VOF) can help law firms manage compliance risks and reduce the chance of fraudulent activities?
Open banking is a relatively new concept that refers to the practice of giving third-party access to financial data. This account data includes everything from transaction history to account balances and is used to get a clear picture of an individual's financial situation. This can be helpful in identifying potential red flags that might indicate fraudulent activities within your banking app, etc.
While open banking sounds like it could be a security risk, the reality is that it's very secure and will not share your data. Banks are required by law to use strong encryption methods and protect customer data, so there's no need to worry about the account information being compromised.
Open banking is a way for financial institutions to share customer data in a secure and regulated manner. By using open banking technologies, law firms can quickly and easily verify the source of their client's funds. This is important because it helps to prevent money laundering and other forms of financial crime. In the past, VOF checks were often done manually, which was time-consuming and could be susceptible to human error. With digital VOF, all the necessary information can be accessed securely and quickly, making the process more efficient and less risky.
More and more clients are using their mobile devices to carry out day to day banking transactions so they are already comfortable with the technology, adding digital VOF to your onboarding journey could help to take verification from 3 days to 3 clicks.
With insurance renewals increasing and not looking to slow down anytime soon - law firms have an opportunity now more than ever before to embrace open banking. Powered by Truelayer, leading provider of open banking services with over 50% of banking traffic from the UK, Ireland, and Spain you can reduce your risk of reprisals while providing a simple, effective, secure solution to your clients.
For more information on how Perfect Portal can help your law firm save time and automate file opening tasks, request a demo today.
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