Caught in the compliance paradox?

Compliance in the legal sector presents a classic dilemma. On one hand, it’s the non-negotiable cornerstone of your firm’s integrity, a shield against hefty fines and reputational ruin. On the other, the resources, time and recognition required to do it effectively are often in short supply. It’s a high-stakes balancing act where the stakes keep getting higher.

The confidence gap in AML for law firms

While most regulated businesses feel they have a good handle on their obligations, the legal sector is lagging. Thirdfort’s research, “The compliance paradox: Small teams, big demands”, uncovered a concerning confidence gap: only 50% of law firms are confident that their current policies and procedures are effective enough to protect them from regulatory fines.

Let that sink in. Half of legal compliance leaders are unsure if their defences will hold up under scrutiny. In an environment where the Solicitors Regulation Authority (SRA) is increasingly willing to issue multi-million-pound fines for anti-money laundering (AML) failures, this is a significant risk. This gap highlights a dangerous disconnect between the weight of responsibility placed on compliance teams and the support they receive to manage it.

More than just a tick-box exercise

There’s a clear call from compliance professionals for a greater understanding that robust anti-money laundering (AML) checks take time. When asked what they wished others in the firm understood about the role, 26% told us they wanted colleagues to understand that time was needed to ensure accuracy and effectiveness. It’s not a simple tick-box exercise, but a critical defence for your firm and your clients that involves peeling back layers, scrutinising documents and making nuanced judgements. Yet the pressure to get things done quickly often clashes with the diligence required for effective AML processes.

A battle for respect and resources

This lack of understanding has a direct impact on the standing of compliance professionals within their firms. Our research showed that compliance is not the well-respected function that it should be seen as, with 51% of respondents. saying the function is not respected in their firm. This contributes to a culture where the team’s warnings can be downplayed and their requests for information are seen as a hindrance rather than a necessity.

Compounding this issue is the pressure on budgets. In a tough economic climate, firms are scrutinising every line item, and compliance is often viewed as a pure cost centre. More than 31% of compliance professionals believe their budget will decrease in the next 12 months. This leads to under-investment in the very technology and training that would make processes more efficient and secure. It’s a false economy. Squeezing compliance budgets today only increases the risk of incurring a far greater cost tomorrow in the form of regulatory fines, enforcement action and irreparable damage to the firm’s reputation.

The personal cost of compliance

The strain on compliance professionals is reaching a breaking point, and the statistics paint a worrying picture of burnout. We found that 35% of compliance leaders feel overwhelmed by their workload, with nearly half (42%) working overtime at least once a week to manage AML tasks.

This simply isn’t sustainable. Beyond the immediate impact on wellbeing, the report reveals a significant retention risk, with 78% of compliance leaders saying they would consider leaving their role for one that offered better support and resources.

In a field that relies so heavily on experience and institutional knowledge, this potential brain drain poses a direct threat to a firm’s resilience. Can your firm afford to lose its most experienced guardians?

What’s the next step?

The compliance paradox presents a serious challenge, but it’s one we can overcome. It requires a fundamental shift in perspective, where compliance is not seen as a cost centre or a bottle neck, but as a vital, strategic function that protects the firm and enables sustainable growth.

Empowering your team with the right technology is the first step. By automating the manual, repetitive aspects of AML, you free up your experts to focus their skills on the complex, high-risk judgements where they add the most value. It’s about fighting fraud, not fighting for time and resources.

Read the full report to understand the scale of the challenge and discover how technology, alongside a proactive culture of compliance, can help you bridge the gap.

About Thirdfort

Thirdfort’s client due diligence platform combines automated ID verification, anti-money laundering and Source of Funds checks to protect regulated professionals, and their clients, from fraud and money laundering. Thirdfort combines industry-leading data sources and suppliers with user-friendly technology, making client due diligence simple and secure.