Insight: ID fraud and Client Verification

This blog takes a look at the risks of ID fraud and client verification

Verifying who you are dealing with when it comes to your responsibilities under the Money Laundering Regulations 2017 is becoming increasingly challenging as organised crime finds newer, smarter and more effective ways to perpetrate fraud and launder funds from criminal activities

And while it is easy to get hung up on getting passports, driving licenses, certified ID etc, law firm’s responsibilities run much deeper. When completing Customer Due Diligence, the client relationship must be considered in the round and a full risk assessment of the relationship must be completed.

This will include considering factors such as whether you meet the client or not, how you receive and remit funds, their geographic location, the service for which you are being engaged etc.

The SRA’s Risk Outlook identifies trust and company formation, conveyancing and client account services as the highest risk from the point of view of money laundering.

And when it comes to clients you also need to consider the risks associated with people involved in certain sectors according to guidance from the Legal Sector Affinity Group (LSAG), including, but not limited to, those in;

  • public work contracts and construction, including post-conflict reconstruction
  • real estate and property development
  • the oil and gas industry
  • the nuclear industry
  • mining (including diamond mining and trading)
  • arms manufacturing/supply and the defence industry

When it comes to conducting Customer Due Diligence, the guidance from LSAG provides a clear delineation between client identification, and client verification:

  • Identification of a client or a beneficial owner is simply being told or coming to know a client's identifying details, such as their name and address.
  • Verification is obtaining some evidence which supports this claim of identity (*4.3.2)


Verification should be completed on the basis of documents or information which come from a reliable source, independent of the customer. This means that there are a number of ways in which you can verify a client's identity including:

  • obtaining or viewing original documents
  • conducting electronic verification
  • obtaining information from other regulated persons
  • obtaining information from other reliable publicly available sources (*4.33)

One of the biggest challenges in identification and verification is ID fraud, imitation, and the proliferation of fraudulent documentation.

When battling against the increasingly sophisticated methods employed by fraudsters, lawyers may consider using newer technologies to help them combat the threat.

Following the announcement of Lawyer Checker’s tie up with client ID, verification and source of funds tool Thirdfort, find out how you can use new technologies to de-risk your Customer Due Diligence and speed up how long it takes to open the case file.

Source: Legal Sector Affinity Group Anti Money Laundering Guidance for the Legal Sector