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Aipedia: Solicitors and law firms
Law firms can use AI to verify identity and screen clients, but the firm stays responsible for its customer due diligence whatever the vendor's tool says. AML failures carry regulatory penalties that PI usually excludes, alongside negligence claims that PI may cover.
Part of: AI in solicitors and law firms
In short
Firms use AI tools for electronic identity verification, liveness and document checks, sanctions and PEP screening, and analysis of bank statements for source of funds. Under the Money Laundering Regulations the firm remains responsible for its due diligence, so a vendor's "pass" is evidence, not a decision. Deepfake documents and synthetic identities are a growing risk. Fines and penalties are a permitted exclusion under the SRA minimum terms, so penalties for AML failings are usually uninsured. A client or third party who loses money through the firm's negligent checks may have a claim within PI.
Client onboarding is one of the most automated parts of a law firm. AI-driven tools compare a selfie with a passport photo, check documents for signs of tampering, screen names against sanctions and politically exposed person lists, monitor for adverse media and read bank statements to build a source of funds picture. Conveyancing and private client teams use them heavily, because the money laundering risk in property and estates work is high and the volume of checks is large.
Solicitors carrying out regulated work must comply with the Money Laundering Regulations 2017, and the SRA supervises firms' compliance. The firm decides what due diligence is needed, assesses the risk and remains responsible for the outcome even when it uses a technology provider. A vendor result is one input to that judgement. The SRA's warning notice makes the same general point about AI: it "does not diminish or transfer your professional responsibilities". Code for Firms 2.1 requires effective governance, systems and controls, which the SRA reads as including AI risk, and the COLP and MLCO roles carry personal accountability.
The SRA's Risk Outlook on AI also flagged bias as a risk. A screening tool that produces more false positives for some groups can lead to unfair treatment of clients, which firms should monitor. Since 5 February 2026, new UK GDPR rules on automated decision-making have been in force under the Data (Use and Access) Act 2025, which matters if a tool effectively decides whether to refuse a client without meaningful human involvement.
Illustrative: a conveyancing firm accepts an AI verification result for a seller who appears to own an unmortgaged property. The identity documents and selfie were manipulated. Completion monies are paid away, the true owner discovers the sale, and the buyer and their lender claim against the firm. The SRA also looks at the firm's AML controls.
Two different exposures arise. A civil claim by a buyer, lender or client for money lost through the firm's negligent checks is usually within the civil liability cover required by the SRA minimum terms, subject to the policy terms; the closed list of permitted exclusions has no AI exclusion. Regulatory consequences are different: fines and penalties are a permitted exclusion under the minimum terms, so an SRA or other regulatory penalty for AML failings is usually not covered. Whether any costs of responding to a regulatory investigation are covered depends on the policy wording. Our guide to AML failures and solicitors' PI explains this split, and this AML failure scenario shows how a claim can develop.
Seller identity fraud claims can affect several transactions at once, so aggregation wording matters: see conveyancing fraud and aggregation.
Apex arranges PI for solicitors and law firms, including conveyancing and private client practices. A broker can explain where your PI ends and where fines and cyber exposures sit. See the AI in law firms hub, AI client intake and Does solicitors' PI cover AI mistakes?.
You can use one, but the firm remains responsible for its customer due diligence under the Money Laundering Regulations. Treat the result as evidence, review the underlying report, and record your own risk assessment and decision.
Usually not. Fines and penalties are a permitted exclusion under the SRA minimum terms. A civil claim by someone who lost money because of negligent checks is different and is usually within PI, subject to the policy terms.
Layer your checks. Do not rely on one automated pass, especially for high-risk transactions such as unmortgaged property sales. Combine document and liveness checks with source of funds analysis, independent verification of ownership and human review of anomalies.
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.
