Why Law Firms outsource their due diligence searches

Published by GlobalX on Feb 27, 2020

In recent years there has been an ever-increasing requirement on law firms to conduct extensive, in-depth due diligence on their clients and on behalf of their clients.

The increase in work required to meet KYC and AML regulations, while vitally important, can often be a strain on a law firms’ scarce resources. Even firms with inhouse specialist functions are feeling the increased pressure of greater regulation and compliance.

Many solicitors are now looking at how they can improve their due diligence processes to help maintain already tight profit margins while also offering a more customer-friendly due diligence process.

The main reasons law firms choose to outsource their due diligence and corporate research.

Access to expert advice & services

As international trade becomes increasingly essential for all businesses, it also brings with it many challenges. There are over 295 different jurisdictions internationally all with own set of rules and requirements when it comes to recording and obtaining company information. On top of that, they each have their own online systems which are very different.

Gaining access to all of these systems can be very time consuming; some offer instant access, while others have a more robust registration process. Using an agency, like ours, that already has access to 100s of jurisdiction, knows what nuisances and issues to look out for can save you a lot of time and money.

It allows fee earners to focus on what they do best

When it comes to AML checks a lawyers job should be to assess the information and identify possible red flags not researching where to get the document from, finding their way around new systems and remembering multiple logins. Outsourcing your international due diligence means your fee earners can concentrate on billable work rather than admin.

Easier invoicing and payment terms

One of the challenges of conducting due diligence on an international scale is that you also need to set up accounts with hundreds of different jurisdictions. Not only is this additional work for yourself but also your accounts team who are left with trying to engage with suppliers from across the globe.

Using a single central source of information simplifies all of this. You only deal with one account department with the same standard terms and conditions no matter where in the world the data is coming from.

Scale with confidence

As Law Firms grow and take on more international or complex work, then it’s likely your requirement to perform enhanced due diligence becomes more regular.

You could look to handle this all inhouse by hiring an experienced researcher, but recruiting can often be an obstacle. Finding the right person or training someone internally can often take months, time which many law firms don’t have when working on big deals.

Outsourcing your due diligence to an external agency offers the flexibility to scale inline with your business needs even on a case by case.

Outsourcing your corporate searches doesn’t have to mean replacing any inhouse resource do have. The right partner should so supplement your existing team acting as an extension of your current setup.

Choosing the right information partner

Many law firms are put off outsourcing their compliance and due diligence research as they have concerns over the accuracy of the information. These are very valid concerns as ultimately the responsibilities rest with them, not the data provider.

A quick google search will provide you with a long list of companies who offer access to corporate data from across the globe. Choosing one that you can rely on to provide you with critical and accurate information can be difficult.

If you are looking to outsourcing your due diligence searches here some things to consider before choosing the right partner

  • Make sure documents are sourced directly from the official register and are not from another third-party information provider.
  • Check to see whether they have a significant insurance policy in place to cover against any accidental errors
  • Check for references and testimonials from their existing clients both on their website and on social media such as LinkedIn
  • Are they a specialist information provider, or are they tailored more towards business development? There is a big difference between the information needed for an AML check compared with getting a directors name for business development.
  • What are their training policies? How do they keep their staff up to date with the latest laws and regulations? They don’t have to be lawyers, but they do need to be experts in their fields
  • Do they have any accreditations to support their claims? For example, as a registered company formations agent, we’re registered with the HMRC, and we pass their ‘fit and proper test’ to show that we comply with UK money laundering regulations

How GlobalX can help

If you’re looking for an experienced, reliable and trusted information partner to remove some of the burdens of conducting corporate due diligence, then GlobalX can help. We’re trusted by 80% of the top 100 UK law firms and as well major banks, private equity and accountants.

We offer easy and secure online ordering of corporate documents from over 295 jurisdictions, including the British Virgin Islands, Delaware, Dubai, Gibraltar and Hong Kong. We always source documents in real-time directly from the official registry and can also conduct fresh investigations using local agents in difficult to reach countries.

If you would like to discuss our services, call us on 0800 197 1757 or complete our online contact form.