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Aipedia: Conveyancers and property lawyers
AI can read bank statements and flag source-of-funds and source-of-wealth anomalies, but the firm’s duties under the Money Laundering Regulations stay with the firm. That matters because AML penalties are generally uninsurable, while a lender claim after a missed fraud may land on PI.
Part of: AI in Conveyancers and property lawyers
In short
Open banking and AI tools now read months of bank statements, trace deposits and flag unusual transfers for conveyancers. They can miss what matters (false negatives) or flood the team with alerts that get waved through (false positives). Responsibility under the Money Laundering Regulations, and for any reporting decision, stays with the firm and its staff. Regulatory fines and penalties are generally not insurable, and the SRA minimum terms permit their exclusion. A claim by a lender or another party who lost money because the firm missed a fraud may fall under PI, subject to the policy terms.
Source-of-funds checks are among the most time-consuming parts of a purchase file. AI tools now take statements by upload or open banking, categorise transactions, identify large or unusual deposits, match them to the client's explanation and produce a risk summary. Some score the client automatically and recommend whether to proceed.
The tools are useful for volume. The judgement calls are still human: whether a gift from a relative is plausible, whether a pattern of cash deposits is explained by the client's business, and whether something should be reported.
The Money Laundering Regulations place customer due diligence, ongoing monitoring and record-keeping duties on the firm, and section 330 of the Proceeds of Crime Act 2002 places suspicion reporting duties on individuals in the regulated sector. Using a tool does not transfer them. A firm should be able to show why it was satisfied, not just that a tool produced a green result.
For solicitor conveyancers, Code for Firms 2.1 requires effective systems and controls, and Code 7.2 requires decisions to be justifiable. The CLC's AI and Technology Guidance does not cover AML, but its Principles still apply to the technology itself: plain-English explanations of automated risk scoring (Principle 4), understanding how outputs are reached (Principle 5) and testing for bias (Principle 10). Where a tool makes onboarding decisions automatically, the reforms in s.80 of the Data (Use and Access) Act 2025, in force since 5 February 2026 under SI 2026/82, may be relevant.
False negatives are the obvious danger: the tool categorises a deposit as salary or savings when it is a transfer from an unconnected third party. False positives are subtler. If the tool flags dozens of items on every file, staff learn to clear them quickly, and the one real concern gets the same treatment.
Bias is another issue. A model that treats certain patterns of income or overseas transfers as higher risk may lead to unfair outcomes for some clients, which is why the CLC asks practices to test for inbuilt bias.
Illustrative scenario: a buyer's deposit is described as savings and a family gift. The AI tool shows a steady balance and marks the file low risk. It does not flag that most of the balance arrived in a few transfers from a company with no stated link to the buyer. The purchase completes with a mortgage. Later it emerges the deposit came from a third party with an undisclosed interest, the mortgage was obtained by misrepresentation and the borrower defaults. The lender pursues the firm for failing to report matters it was instructed to report. The regulator separately examines the firm's AML controls.
Two different exposures arise. Regulatory fines and penalties for AML failings are generally not insurable, and fines and penalties are among the permitted exclusions in the SRA Minimum Terms under the SRA Indemnity Insurance Rules. The firm bears those itself.
A civil claim by a lender or another party who suffered loss is different. It may be covered by PI, subject to the policy terms, the facts and any dishonesty or fraud exclusions. CLC practices must hold at least £2m for each and every claim under the CLC PII arrangements. See AML failures and PI and an AML failure scenario.
Apex arranges PI for conveyancers and can explain where AML exposures sit in your cover. See AI in conveyancing and, for law firms generally, AI AML and KYC checks for solicitors.
No. The tool can analyse and flag, but customer due diligence decisions and suspicion reporting remain the responsibility of the firm and its people under the Money Laundering Regulations and the Proceeds of Crime Act 2002. Record the human reasoning behind each decision.
Generally not. Regulatory fines and penalties are usually uninsurable, and the SRA Minimum Terms allow insurers to exclude them. PI is aimed at civil liability claims, such as a lender claiming its loss.
Treat it as a control weakness. If staff clear alerts routinely, a genuine concern can be missed. Adjust settings, document how alerts are reviewed and make sure higher-risk items get senior attention.
Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.
Start a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.
