The essential role of AML checks in legal practice

These days, solicitors are not just legal advisors; they’re vital players in some of the largest and most sensitive financial transactions. Whether managing property purchases, setting up trusts, handling corporate transactions, or dealing with cross-border deals, it's commonplace for solicitors to oversee the movement of significant sums of money.

Unfortunately, this central role makes the legal profession an attractive target for money launderers and other financial criminals. And that's why AML checks for solicitors aren't just a legal requirement, they're an essential safeguard. Failing to stay up to date with the latest regulatory changes puts your clients and professional reputation at real risk.

Solicitors must prioritise AML compliance

For law firms in the UK, AML compliance is critical to:

• Prevent misuse of legal services – Criminals frequently attempt to utilise property deals, trusts, and corporate structures to legitimise illicit funds.
• Protect your firm’s reputation – One compliance failure can seriously erode trust in your organisation.
• Avoid fines and legal action – The Solicitors Regulation Authority (SRA), HMRC, and international AML directives all mandate rigorous AML due diligence.

By conducting thorough AML checks, solicitors can identify the warning signs of suspicious activity early and greatly reduce the risk of becoming a gateway for financial crime.

Key elements of AML compliance in the legal sector

Effective AML processes hinge on three key pillars: Customer Due Diligence (CDD), ongoing monitoring, and Enhanced Due Diligence (EDD). CDD is key when verifying identity, understanding the nature and purpose of the business relationship, and examining beneficial ownership structures.

Ongoing monitoring, or perpetual KYC, requires the constant oversight of all relevant customer behaviour as a proactive risk management. Any anomalies such as unusual transaction patterns, offshore transfers, or sudden changes in ownership will be identified and dealt with early.

PEPs and Sanctions Screening  for lawyers

PEP checks and sanctions screening are essential parts of AML compliance for the legal sector. Many customers are deemed higher-risk for a multitude of reasons, and in these cases, EDD is essential, involving more extensive inquiries into the source of funds and the legitimacy of transactions to ensure compliance and mitigate exposure to illicit activities.

• Politically Exposed Persons (PEPs) – These individuals hold prominent public positions and may be at higher risk for corruption or bribery. Solicitors must apply enhanced due diligence to assess the legitimacy of their wealth and transactions.
• Sanctions checks – Sanctions lists include individuals, companies, and nations subject to restrictions from governments or international bodies. Engaging with a sanctioned party can lead to severe fines, legal consequences, and damage to your professional standing.

Failing to identify a client as a PEP or sanctioned entity can expose your firm to significant financial and reputational risk. There really is no excuse, and regular screening ensures your legal practice stays compliant and avoids inadvertently facilitating prohibited transactions.

Technology can help law firms stay AML compliant

Manual AML processes can be slow, very resource-intensive, and prone to oversight. Technology like Red Flag Alert's Compliance solution can transform internal AML processes and make them much more scalable for growing practices.

Red Flag Alert provides a fully integrated AML solution designed to solve common painpoints within the legal profession:

• Real-time AML risk assessments using live business and financial data
• Automatic checks on UBOs, PEPs, and sanctions lists
• Ongoing monitoring alerts to flag emerging risks instantly
• Seamless, digital onboarding tools that maintain compliance while improving client experience

Whether handling high-volume property transactions or complex international deals, Red Flag Alert helps solicitors remain fully compliant, protect client relationships, and reduce exposure to financial crime.

Understanding the upcoming changes to the property market

There are some significant recent changes to legal professionals operating within the UK property market. The Office of Financial Sanctions Implementation (OFSI), which sits as part of HM Treasury, is responsible for implementing and enforcing financial sanctions. These sanctions, which apply to all individuals and entities within UK jurisdiction (and to UK persons anywhere in the world), are designed to safeguard national security. Not only that, but they play an essential role in upholding foreign policy and protecting the integrity of the UK’s financial system.

For solicitors, understanding and complying with OFSI guidance is critical. Financial sanctions are in-depth, but can involve asset freezes, major restrictions on financial services, and prohibitions on dealing with designated persons (DPs).

If you have reasonable cause to suspect that a client is a DP or has breached sanctions, you are legally obliged to report it to OFSI “as soon as practicable,” including details of any funds or economic resources you hold for them. Failure to meet these obligations can result in serious consequences for your firm, making it more important than ever to ensure that PEPs and sanctions screening processes meet regulatory expectations and stand up to scrutiny.

Using AML as a strategic advantage for Solicitors

AML compliance has evolved beyond being a mere regulatory requirement; it is now a strategic non-negotiable for progressive legal practices. By integrating rigorous AML, Politically Exposed Persons (PEP), and sanctions screening into everyday workflows, solicitors not only ensure compliance with statutory obligations but also mitigate reputational and financial risk while reinforcing client confidence.