When the SRA published their Risk Outlook 2014-15 in July of this year to assess the key risks to firms in carrying out their regulatory objectives there was a new entry in the Risk Outlook chart compared to 2013, namely bogus law firms.
The other four including misuse of money, money laundering controls, a failure of service and diversity within the workplace remain, so where has this new threat emerged from?
Many law firms and consumers have been targeted by this type of scam over the past year and the common thread is that it often involves the identity theft of a genuine law firm in order to access information or to steal money.
The trend is an upward one in terms of reported cases. In 2013 the SRA received 548 reports about bogus law firms, up from 312 in 2012 and in 2014 there were 235 reports in the first four months alone. If this rate is annualised then there will be over 700 reported instances in 2014 which would be a 125% increase on 2013. Based on these figures it is easy to see why bogus law firms are now seen as a real risk by the SRA to all sizes of law firms.
Find a solicitor: It is no longer satisfactory simply to use the ‘find a solicitor’ search on the Law Society’s website when checking the other side during a transaction, as sophisticated fraudsters can impersonate real law firms.
Aside from the guidance given by the SRA, the CML’s stance is in 3.1.4:
“If you are not familiar with the seller’s solicitors or licensed conveyancers, you must verify that they appear in a legal directory or they are currently on record with the Solicitors Regulation Authority or Council for Licensed Conveyancers as practising at the address shown on their note paper.”
Additionally under the OFR Code of Conduct 2011 there are probably three principles that stand out, namely:
Principle 4 – Act in the best interests of each client;
Principle 8 – Run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles; and
Principle 10 – Protect client money and assets.
With fraudsters becoming more sophisticated and law firms handling significant sums of money, what are the practical steps that can be taken to ensure best practice?
Best practice tips for identifying and nullifying bogus law firms