Month: February 2025

Legal AI can pose both a challenge and an opportunity for legal risk and compliance professionals. As a new technology, it has unknown risk factors, like reliability, data security, etc. However, it also has the potential to streamline processes like due diligence and anti-money laundering checks. On Episode 25 of The UNCOVER Pod, I had the opportunity to speak with Andrew Cheung, the Global General Counsel at Pinsent Masons, about the tool he is developing in partnership with Xapien to assist legal risk and compliance professionals. Read on to find out more. 

“What we’re trying to do is create a large language model automated due diligence system. At the moment, we’ve got about 15 people doing anti-money laundering checks in the UK. We’ve got another nine people outside of the UK who are running those checks, and they’re all doing it manually. In my view, having looked at and worked with these processes for years, it’s unbalanced. What happens is that you put all your resources into matter opening and intake, but that leaves you with very little resources for ongoing monitoring, understanding risk, or risk advisory type work, and you have to treat every client the same. They go through the same process and amount of resources until they identify as high-risk issues, and then they have high levels of resources. 

We do about 2,000-4,000 clients a year. Each of those 4000 clients requires a human being to look at their case, do the research, and write up the notes. Of those 4000 clients, only about 6% of them are high-risk. We’re grinding this process out. There’s a delay of around eight days while that happens. A lot of the time, that process has limited to no value because it’s just going through the steps because you have to, which wastes time and resources. 

When we were looking at AI as a firm, we were looking at what we’ve termed foreground AI risks and opportunities and background AI risks and opportunities. What I mean by that is, how could we use AI to improve the running of the firm by making things better, quicker, more efficient, safer, etc? On top of that, how can we use AI on client-facing things to make things quicker and better? Now, foreground AI is a bit of a minefield because it is a direct threat to law firms’ traditional business and pricing models, their structure, and their profit-sharing arrangements. The whole thing is at risk of AI, but it’s also a tremendous opportunity. 

Getting that balance between risk and opportunity is hard, but in many ways, there is less risk associated with background risk because you’re just looking at processes and thinking, ‘We need to improve that’. So I looked at AI, AML and master opening. I could see with AML that it takes an average of 14 days to do that due diligence process. If you’ve got 3000 clients taking about 15 days on average, that is 2.1 million hours of delay. That seems like a lot, doesn’t it? And there is very little return on those 2.1 million hours. 

So, I thought this was the right place to invest in, and that’s how we ended up doing the project with Xapien. They have a fantastic tool that does risk intelligence which is very good for individuals. It looks at ESG risk, financial crime risk, and sanctions by scraping the entire known internet. It puts it in a very easily digestible and cross-referenceable format. It’s a fantastic tool, but it wasn’t very good for corporates because it wasn’t doing due diligence. Our collaboration is based on turning it into an automated due diligence tool that can do the first acquisition of as much information from public sources and corporate information aggregators like Moody’s assess it for risk. We’re at the point where the system can go and get any extra information which it needs to verify, depending on the level of risk, and then do a secondary risk assessment and serve that up to the AML analyst again. 

If something is low risk, like a subsidiary of Deutsche Bank, we just pass it through the system. What that does is release 80% of the capacity of the AML team that is currently devoted to matter onboarding so that they can focus on high-risk projects. They can start advising our partners about any high risks that they may be taking on if they accept those clients. It also increases the perception of the value of the AML process because, at the moment, it is a painful administrative hurdle. Now, if there is a low-risk client, we can open their case almost instantaneously.”

To find out more about automating your due diligence process and what other AI tools are available within the legal sector, tune into The UNCOVER Pod here. 

Have you ever wondered what it’s like to be a Compliance Manager in a law firm? On Episode 24 of The UNCOVER Pod, I had the pleasure of sitting down with Eloise Butterworth, the Compliance Manager at Lester Aldridge, and talking about her experiences in the role. Read on to find out how she juggles a changeable workload and navigates the interpersonal relationships that make her work possible. 

What does a typical day look like in your role as a Compliance Manager?

What I like about it is that there isn’t a typical day. I cover a breadth of different topics and parts of the business, working in risk and compliance. That means that no two days are the same. You could have a plan for your day, but in my experience, it normally goes out the window by about 10:15 because it’s quite a reactive role. There are proactive elements of the job, obviously, like the big tasks and the projects within your firm, but a large proportion of it is reacting to the needs of the business that are unfolding on the ground. That definitely keeps me on my toes.

What’s your approach to balancing proactive and reactive tasks?

It can be difficult. A lot of people who work in risk and compliance are naturally pretty organised, and we like to be in control. We do have to let that go a little bit though, because because there are so many aspects of the job that you just can’t plan for. As with all jobs in a law firm, time management and the ability to prioritise are super important, and so is never panicking. No one comes to compliance for them to panic. That’s their job. Our job is to formulate and execute a plan quickly and efficiently.

What are the most common challenges you face on a day-to-day basis?

It’s the sheer volume of regulation that the legal sector is now subjected to. In practice, what that does is put a huge amount of pressure on fee earners, who are already under huge amounts of pressure from other areas of the business like client expectations, court delays, land registry delays, and everything else. I have to manage that and be able to engage with my colleagues in a way that helps them understand why I need to do all of these things and what the expectations are while still having that commercial awareness,

Have you ever encountered resistance to new measures that you implemented, and how did you address it?

It is natural in this type of role to experience some degree of pushback, especially when you’re implementing changes, because the majority of the time those changes require people to do something else besides what they’re already doing. I’m rarely able to say, ‘Guys, we don’t need to do that anymore’. So it is inevitable that I get some pushback, but I think the key is framing the reason for the changes when you’re communicating them, not as an afterthought, but when you’re setting the scene. You have to take your colleagues on a journey with you. Explain, ‘This is what we have been doing. This is what the development is. This is what it means for us as a firm, and this is what it means for you in your day-to-day practice.’ Foreseeing what those issues might be and addressing them before they’re raised is a really important skill to develop in this role. 

What is the most rewarding aspect of your role?

What I didn’t appreciate when I moved from a fee-earning role into a risk and compliance role was the extent to which I would still be helping people on a day-to-day basis. I’m just not helping clients – my clients are essentially my colleagues. It’s rewarding because the nature of my work is such that people come to me when they’re stressed or anxious about something, and I have the ability to allay those concerns, come up with a plan or help them move that matter forward. At the end of the day, they’ll go home and sleep better at night because they’re not stressing about that issue anymore. I love that aspect of the job. 

I also enjoy delivering training, because I can engage with everybody and have those conversations about what the risk and compliance team are trying to do. We’re invested in what the fee-earning teams are trying to do, which helps make the compliance function a more inclusive part of the business.

To find out more about Eloise and her role, tune into Episode 24 of The UNCOVER Pod here.