intappRisk Update

Law Firm AML Enhancement Encouragement — On Navigating New Anti-money Laundering Rules (Sponsor Spotlight)

In this month’s sponsor spotlight, Nigel Riley, Intapp’s general manager for risk and compliance solutions, reminds us to pay close attention to the unfolding enhancements Congress is making to AML rules. His article reviews details of the impending changes, and offers advice on how to prepare sound response strategies: “ENABLERS Act: Enhance your risk and compliance management” —

  • “For years, experts have warned professional service firms in the U.S. that they need to start preparing for money laundering regulations. And in recent months, those warnings have become impossible to ignore.”
  • “The latest and loudest alert came in July 2022, when the U.S. House of Representatives proposed the Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act. This bipartisan legislation, aimed at so-called gatekeepers, would expand anti-money laundering (AML) surveillance — currently required of financial institutions — to professional services firms, requiring accounting and law firms to collect, monitor, and report specific types of client information.”
  • “Passage of the ENABLERS Act is not guaranteed. It’s currently an amendment to the National Defense Authorization Act (NDAA), which observers expect congress to vote on by December. It could undergo significant changes prior to the final vote, or not pass at all this year.”
  • “My advice to firm leaders is simple:
    • Don’t delay. Proactively prepare by enhancing your KYC and AML processes.
    • Focus on the long-term. Augmenting your firm’s risk and compliance programs can have ongoing, positive impacts on other aspects of your business.”
  • “Firms will have to find their own path, but they can get there by focusing on three key areas:
    • Process — Now is the time to thoroughly review current policies and practices, including overall governance framework and risk and compliance protocols for assessing risks associated with accepting new clients and engagements, clearing conflicts, onboarding new business, monitoring engagement performance, and managing client relationships. You can also map out a plan for review and conduct a gap analysis against the newly proposed requirements.
    • People — The risk and compliance team shouldn’t be the only function to prepare for the new regulatory requirements. Instead, a cross-functional evaluation of the client lifecycle and all touchpoints provides a better approach to comprehensively assessing your firm’s current risks, capabilities, and staffing needs. Enhancing team resources, upskilling staff, and identifying inefficiencies can create additional capacity to satisfy the new requirements and allow staff to allocate more time to higher-value work and analysis.
    • Technology — It’s critical to determine if your firm’s current software is optimal enough to support more robust tracking, greater amounts of data, and enhanced reporting as required by the proposed legislation. Take this opportunity to reconsider the software tools currently in use at your firm, evaluate paper-based or manual processes, and identify areas prone to human error where automation and systems integration could mitigate risks and make adopting new regulations easier.”
  • “As my colleague and risk management expert Meg Block notes, preparing for the requirements of the ENABLERS Act will require firms to review client onboarding procedures and create additional mechanisms for ongoing monitoring throughout the client lifecycle. This process could create long-term benefits.”
  • “Whether or not the ENABLERS Act passes this year, the message is clear: Professional services firms need to prepare for AML regulatory requirements. By starting now, firms can better understand how the regulations may affect them and where they need to focus.”

For more detail, see the complete blog post.