Approve engagement letter
As part of the AML Customer Due Diligence, it is essential that every client receives and approves the engagement letter, general terms and conditions, and the privacy statement. When signing the agreement, obviously, but also throughout its validity in the event of changes, such as changes to the general terms and conditions or applicable rates.
An important part of the AML Customer Due Diligence is the engagement letter. This is where you enter all name and address details, rates and agreements. Not only is this mandatory, but you must also be able to submit approved engagement letters during supervisor’s audits.
What does the engagement letter process look like? Do you need an engagement letter for every file and where do you save it? Has an AML paragraph been included? This is just a small selection of the main questions involving the engagement letter.
RegLab takes care of sending and monitoring the approval of the engagement letter completely digitally. This engagement letter serves like a basic document to record agreements made and any (general) conditions, such as rates. The aim is to prevent discussions afterwards. It is mandatory to send these out as complete as possible and to receive them back.
It only proves difficult in practice to send out this engagement letter, general terms and conditions and privacy statement on a structural basis. Subsequently, another challenge presents itself in daily practice: to receive the approved documents back and save them in a central place. While this is essential for the internal AML administration and for the supervision of the supervisory authority.
For the lawyers among us:
What does Voda say about the engagement letter?
You used to work as a lawyer without an official agreement. In retrospect you did what was necessary to justify the bill. Nowadays, the engagement letter, from the Dutch Bar, through Voda (Article 7.5) is mandatory.
Explaining the engagement letter as stated in Voda, Article 7.5
“When confirming the agreement for services, it should be made clear to the client who on the side of the lawyer is a party to the agreement. If a lawyer is involved in the execution of the assignment who is not permanently attached to the office, the client will be informed about this in the engagement letter. It must be clear to which council of the bar the lawyer belongs, how the lawyer is insured in terms of his professional liability risk and which office complaints procedure applies to the lawyer with regard to the work he performs on behalf of the client.”
Source: Dutch Bar Association
Is the engagement letter mandatory?
Based on the above, it is clear to the legal profession that the engagement letter is a must. Fortunately, this is an obligation with a clear goal: to avoid hassle afterwards and to provide clear insight into how you will or will not present the client (and for what financial compensation). A written engagement letter is therefore essential when accepting a case and onboarding a client. Moreover, it forces you to think carefully about the feasibility and strategy of the case. Ultimately, this benefits the quality of your services and the client relationship.
We recommend taking a closer look at the process of an engagement letter. In daily practice, the following happens often: the support staff prepares and sends the engagement letter to the lawyer, requesting that it be forwarded to the client after approval. Being extremely busy, the lawyer forgets to follow up. Or he/she does send it, but there is no check whether the client approves it. If the client does return a signed engagement letter, it is still questionable whether it is saved in the correct central location. What’s more, are all descriptions in the engagement letter accurate, current and addressed to the correct entity? This requires a thoughtful and efficient process. RegLab is here to help.
fast automated approval with RegLab
With an engagement letter, we face two challenges:
Creating an engagement letter, receiving the return and saving it correctly. Are you still looking for an example engagement letter? The Nova has made a model order confirmation available.
- Keeping the agreements up to date, especially for long-term projects. What if the terms and conditions change in the course of time? Many offices struggle with this process.
With RegLab, this is a thing of the past. RegLab ensures, fully automated, that:
- the order confirmation is sent automatically.
- the information and documentation to be supplied are saved in a central place.
- the status is tracked.
- automatic reminders are sent if the client responds (incompletely).
- reports can be run of the order confirmation statuses.
- new versions of terms and conditions are centrally sent and monitored.
- an audit trail for the supervisor is shown at the push of a button.
AML aspect within the order confirmation
Does the confirmation also mention anything about the AML? Indeed, today’s confirmation should include a paragraph that states, among other things:
- that the lawyer, civil-law notary or tax consultant must comply with the AML
- that for that reason certain information is requested from the client
- how data privacy is secured
Order confirmation: aspects
If we look at the model of the Dutch Bar Association, then, in addition to the above-mentioned AML aspect, the following subjects are also a fixed element of the order confirmation:
- Business description
- Name and address details of the client and counterparty and lawyer/authorised party
- Whether the client qualifies for financed legal aid, including an explanation
- Information about any legal assistance available
- Rate agreements
- Information on professional liability
- Agreements regarding confidentiality, AML registration and ICT
- Customer arrangement and how to deal with disputes
Is an order confirmation part of Customer Due Diligence (CDD)?
Customer Due Diligence (CDD), also known as 'Know Your Customer' has become increasingly important over the years. It is because cases involving money laundering, fraud and terrorism have become increasingly common. And because of that, and therefore also in connection with the AML, it is essential to know who your clients are.
When is CCD required? Customer Due Diligence is a tool for offices to help clients to get to know you better. If you want to work the safe way, the CDD will protect you from interacting with people who will damage your trust, which will ultimately impact your reputational image.
If you are subject to the AML, you must prepare a CDD policy and implement it consistently. In this process, you collect crucial information about the client and assess it for any possible risks for your office. At the same time, you will be able to identify any money laundering/terrorist financial activities.
CDD consists of the following aspects:
- Client acceptance, identification and verification.
- The identification and verification of the ultimate beneficial owner (UBO).
- Determining the purpose and intended nature of the business relationship.
- Monitoring and reviewing clients, accounts and transactions.
- Risk management.
An order confirmation is therefore not a mandatory part of the CDD, unlike what many might think. Just like CDD, it is an important part of the AML policy, under which the order confirmation is mandatory. You can read more about CDD and Know your Customer on this page.
KYC: the meaning of it
What is the meaning of KYC, what does a KYC procedure entail and what role does Customer Due Diligence play. Read the answers in this article