There’s a reason political scandals are so compelling. They tend to expose very human failings: assumption, trust and over-familiarity. And while most of us aren’t appointing ambassadors, the same dynamics play out quietly every day in AML compliance.
At the moment, questions are being asked about the scrutiny applied before Peter Mandelson was appointed UK ambassador to the United States. The underlying theme is a familiar one: surely someone so well known didn’t need the usual level of checking?
If that rings a bell, it should. It’s a mindset we see regularly when reviewing firm-wide AML risk assessments. It also crops up in day-to-day practice, often used (sometimes subconsciously) to justify cutting corners on due diligence that firm procedures clearly require.
Familiar clients – good or bad?
Many firms treat “familiar clients” as a mitigating factor. They show up in risk assessments as lower risk. We know the client. We know their background. If something was off, we’d spot it.
Some policies even still refer to the outdated idea of “signing off” ID for people you know — the Rotary Club contact, the school-gate acquaintance, the longstanding business client you’ve acted for for years.
And, to be fair, that sense of comfort is understandable. You’ve worked with them for a long time. You probably do know their background. You might even have relatively recent documents sitting on file that could be reused. There’s also a client-relationship angle: it feels easier to crack on with the work than to send another e-verification link or ask yet again about bank statements. The email fee-earners dread is the mildly irritated “why do I have to do this again?”
More than anything, it’s socially awkward.
What we don’t always acknowledge, though, is that familiarity doesn’t necessarily reduce risk. Very often, it hides it.
The Peter Mandelson parallel
This is exactly what’s now being debated in Westminster. Peter Mandelson is well known and was deeply embedded in the political establishment. Former cabinet minister. Trusted adviser. Personally known to those involved in the appointment.
That level of familiarity is precisely why scrutiny may have been lighter than it should have been.
It’s easy to imagine a similar conversation in a law firm: the compliance manager insisting the process must be followed, the partner pushing back with “I know him — we’ve always known him.” It’s not much of a stretch to picture a version of that discussion happening in Whitehall too. We’re now seeing the consequences of that thinking.
“How far do we really need to go?”
Acting for a client for years does not mean you fully understand their current risk profile. Circumstances change. Relationships evolve. Sources of wealth and funds move on. And uncomfortable though it is to say out loud, it’s not impossible that a client could be playing a very long game.
Illicit funds are often laundered behind a façade of legitimacy. Clean-looking businesses and transactions can sit in front of far messier realities.
In practical terms, that means:
- You can’t assume funds are coming from the same source as last time
- You still need to ask and verify, even if you’ve asked before
- You need proper evidence, not institutional memory or “we’ve always known them”
- AML and sanctions screening must be refreshed — designations change, and red flags emerge in unexpected places
- A new matter risk assessment is required every time, based on current facts, not historic comfort
If similar discipline had been applied before Mandelson’s appointment in December 2024, more attention might have been paid to aspects of his background that were already in the public domain, including his relationship with Jeffrey Epstein — an issue that had received significant media attention well before then.
The broader point is this: focus on what is happening now. That might be the client’s current activities, the source of funds for this specific transaction, or emerging risk themes your firm has identified.
Other risk factors
Familiarity doesn’t sit in isolation as a risk factor. It feeds into others — particularly the question, “does this matter actually make sense?”
In fact, that question becomes sharper when you know the client well. You’re better placed to spot when something doesn’t fit. A familiar client doing something out of character should raise, not lower, your level of curiosity.
That’s true in the Mandelson example too. He is not a career diplomat. His appointment was unusual. In your firm, it might be a long-standing client suddenly entering a new market, moving large sums, or adopting a structure that doesn’t quite align with what you know about them. Because of your existing knowledge, the standard of judgment expected of you is higher. You need to be able to explain, and evidence, why the transaction makes sense.
Often, that means asking more questions, not fewer.
And finally…
AML failures rarely stem from a lack of policies. Much more often, they arise because those policies stop being applied rigorously when it feels inconvenient, awkward or unnecessary, even though that instinct isn’t always justified.
It’s a familiar slide: Familiarity breeds comfort → Comfort breeds assumption → Assumption breeds risk
The safest approach is also the simplest. Treat every matter on its own facts, every time, regardless of who the client is. It’s a lesson law firms know well, and one the government might usefully reflect on too.
