PHACKS | Legal

Lawyers carry out KYC and AML checks for many business reasons, but there is significant variability on how well such checks are done.  Many such checks are ineffective – they do not satisfy the intention of the regulations.  The processes are often slow, bureaucratic and repetitive.  For example, in one EU country, it takes an average of 22 weeks to purchase and take possession of a house, during which you may undergo KYC 14 times, and there have been cases of APPF caused by poor law firm practices in the conveyancing process.   Such friction creates significant risks and costs. Although % of such failures in law firms may be relatively low, the transaction volume means there is significant impact in terms of financial loss, victims and relying parties’ consequences.    

There is also significant variability in the trustworthiness and effectiveness of company registration processes, as well as the number of attributes and quality of the data itself.  Consequently, companies carrying out due diligence of potential partners, suppliers and customers, can have significant problems re-checking data that is in a company register, or checking additional data that is not in a company register, but is required for legal reasons.  This can be more difficult working across borders.   The legal considerations can be complex and the consequences significant if the risks aren’t mitigated well. 

Most functional requirements (see below), stem from contract law and regulatory compliance, however there are also criminal law threats from organised crime and hostile state, whereby the platform could be used to reduce legal vulnerabilities and mitigate some of the related consequences.  Further, participation in the project can enhance strategies to protect record keeping and evidence protection, both of which are important for successful prosecutions and, ultimately, the deterrence of criminals.  

Lawyers can leverage the collaborative KYC/AML requirements from other sectors, as well as adding requirements of their own, particular for law firm–law firm and law firm-customer interactions. 

Realising Value through PHACKS 

Law firms are valuable connectors across different sectors.  Some law firms are much better at KYC, cybersecurity, digital trust services than others, and therefore there is a small but growing number of law firms significantly improving their digital KYC, compliance and trust services for themselves and their clients. In some countries, this is starting to replace manual notary services and creating new lines of business.  PHACKS can accelerate this evolution to decrease costs and increase competitive advantage. 

In the future, there is the opportunity to leverage privacy-preserving capabilities, such as PHACKS, to enable collaboration across accounting firms and their customers, particularly for counter-fraud and cross-organisational anomaly detection to detect repeated attempts by organised crime to identify target people and organisations, and to find ways to extract their money, company secrets and intellectual property.