Supporting Vulnerable Clients in the Anti Money Laundering Environment: A Practical Guide for Law Firms

In today’s regulated legal environment, firms are expected to deliver excellent client care while maintaining strong anti money laundering controls. For many legal practices, particularly those that handle conveyancing work or operate remotely, supporting vulnerable clients within the anti money laundering framework can be challenging. Vulnerable clients often require more time, more understanding and more assistance, but they also require increased vigilance to ensure they are not exposed to financial crime or exploitation.

Vulnerability does not remove a firm’s anti money laundering obligations. In fact, the presence of vulnerability often increases the risk that a client may be exploited by criminals or pressured into taking actions they do not understand. As criminals become more sophisticated in identifying and manipulating people who are elderly, isolated, grieving or digitally inexperienced, law firms must be fully prepared to recognise and respond to signs of vulnerability.

This article explores why vulnerable clients matter within the anti money laundering system, how signs of vulnerability can be recognised, and what practical steps staff should take to protect both the client and the business.

Understanding Vulnerability in an Anti Money Laundering Context

A vulnerable client is someone who, due to personal circumstances or characteristics, may be less able to understand information, communicate clearly, make independent decisions or protect their own financial interests. Vulnerability can be permanent, temporary or the result of a specific life event. Common examples include clients with memory loss or dementia, learning difficulties, mental health challenges, physical disabilities that affect communication, limited English or limited literacy, or those who are experiencing trauma, bereavement, illness or serious stress. A vulnerable client may also be someone who is dependent on others for advice or daily support or someone who appears to be under pressure from another person.

It is important to note that a vulnerable client is not automatically considered high risk for money laundering because of their personal characteristics. Instead, the risk arises from the possibility that another person may be exploiting them. Criminals frequently target vulnerable individuals because they are more trusting, more likely to follow instructions without question and less likely to identify or report suspicious behaviour.

For this reason, a vulnerability must be treated as a significant risk factor within the anti money laundering assessment.

Why Vulnerable Clients Matter to Anti Money Laundering Compliance

Anti money laundering regulations expect firms to adopt a risk based approach that considers the behaviour of clients as well as the nature and source of their funds. Vulnerable clients can be at increased risk of being used as a “front” for someone else who wishes to move money through the property system. They may also be pressured to enter into transactions they do not understand or to transfer funds without realising the consequences. They may have their bank accounts accessed by family members, partners or carers, or may be persuaded to sign documents without fully understanding what they are agreeing to.

When a vulnerable client is involved in a property transaction involving large amounts of money, the risk of financial exploitation can be particularly serious. The Solicitors Regulation Authority expects firms to demonstrate not only that they have recognised the vulnerability, but also that they have taken reasonable and documented steps to protect the client and reduce the risk of money laundering.

Recognising Vulnerability: The First Line of Defence

Vulnerability may be clear from the start or may become apparent as the matter progresses. Staff should be alert to signs such as confusion about key aspects of the transaction, difficulty recalling information, inconsistent explanations, or reliance on another person to answer simple questions. A vulnerable client may appear hesitant, distressed, overwhelmed or anxious. Another warning sign is the presence of a third party who insists on speaking for the client, interrupts frequently or appears to be controlling the conversation.

In remote legal settings, vulnerability can be harder to identify because communication takes place by telephone or digital platforms. A vulnerable client may appear confident in writing but very different when spoken to, or a third party may be present off camera without the firm’s knowledge. Staff must therefore be alert to behavioural indicators as well as documentary concerns.

Supporting Vulnerable Clients Without Weakening Anti Money Laundering Controls

When a vulnerable client is identified, the firm should adapt its communication and approach while maintaining the same level of anti money laundering scrutiny. The goal is to help the client understand the transaction fully, while ensuring that no one else is using the client’s vulnerability for unlawful purposes.

Staff should use clear, plain language and avoid complicated terminology. It can help to slow the pace of the matter, repeat key points and confirm understanding in the client’s own words. Written summaries after calls can also assist the client in remembering important instructions or deadlines. It may also be helpful to hold a video call with the client so that staff can observe their manner, level of understanding and independence.

Direct communication with the client is essential. While family members or carers may wish to help, the firm must be certain that the client is making decisions for themselves and understands the nature of the transaction.

Enhanced Anti Money Laundering Measures for Vulnerable Clients

A vulnerable client requires stronger anti money laundering checks, particularly if there are signs of undue influence or if the financial arrangements appear unusual.

Enhanced identity verification may be required, including additional documents or special steps to confirm the client is who they say they are. Source of Funds must be verified thoroughly, and the client must be able to explain where the money being used in the transaction originates from. If the funds come from another person, that third party must also be subject to due diligence, including checks on their identity, source of funds and source of wealth.

In some situations, staff must also obtain Source of Wealth, which explains how the client acquired their overall wealth over time. This is especially important where the client is elderly, exhibits confusion or has financial arrangements that do not appear consistent with their profile.

Every action taken must be recorded in the file, including discussions, concerns, decisions and any advice provided by the Money Laundering Reporting Officer.

When the Firm Must Decline to Act

In serious circumstances, the firm must decline to act. This may occur where a vulnerable client cannot provide clear instructions, where they appear to be under coercion, where their funds cannot be verified, or where a third party refuses to provide the required anti money laundering documentation. The firm must also refuse to act if the Money Laundering Reporting Officer advises that the matter cannot proceed or if sanctions apply.

Protecting a vulnerable client is always more important than progressing a transaction.

Final Thoughts

Vulnerable clients require patience, clarity and empathy, but they also require strong anti money laundering controls to prevent financial exploitation. By identifying vulnerability early, supporting the client effectively and applying enhanced checks when needed, law firms can uphold their regulatory obligations while protecting the people who need it most.

A culture of care combined with a culture of compliance is the most effective way to protect vulnerable clients and protect the firm.