Law firm fraud – do you know the source of your clients funds?

In the digital age, fraud is showing no sign of slowing and is becoming an ever-present threat across all industries and sectors, in particular law firms that handle highly sensitive information on a daily basis. During these times, cybercriminal activity is becoming more sophisticated, the importance of having policies and procedures in place to mitigate fraud cannot be underestimated. Law firms are obligated to have appropriate Anti Money Laundering policies in place to protect client interests and maintain the integrity of the legal profession.

In this article, we explore some of the safeguarding measures that law firms can take to try and mitigate fraud.

Verifying funds

When conducting conveyancing transactions, law firms are required to complete a source of funds check. However, just checking the source of funds will not provide a clear image of the financial situation. Digitising this process by adopting a digital solution will enable access to a wider source of funds to analyse the client’s financial history. This will make it easier to gather evidence and identify risks.

Using technology

Law firm employees should be adequately trained in identifying AML risks that may suggest financial fraud. However, technology can be implemented to help reduce the risk of human error and identify risks earlier in the process.

Make the process easier

Adopting Open Banking technology provides a secure solution to identifying an accurate source of financial information. This is changing the way that law firms and other institutions are gathering data as Open Banking obtains real-time insight into a client’s account, saving hours of admin time gathering bank statements and PDFs.

Due diligence

Finally, it is important that law firms complete thorough client due diligence. Fraudsters can use a variety of sophisticated techniques so it is very important that law firms conduct the following due diligence.

Verify client identities

Obtain and verify official identification documents to confirm client identity.

Research background information

Conduct background checks on clients and related parties, particularly for high-value or high-risk transactions. This can include checking public records, verifying business registrations, and reviewing financial histories.

Engage face-to-face meetings

Whenever possible, meet clients in person to establish a personal connection and better assess their credibility. This can help identify any initial red flags or inconsistencies.

Conclusion

To conclude, the battle to mitigate against fraud in the digital age is still very much ongoing. Using appropriate technology, adequately training staff and conducting thorough due diligence are just some of the ways to mitigate against fraud. It is important that law firms have appropriate, effective safeguards in place to protect their clients and maintain integrity.

How can we help?

Hawsons is one of the few accountancy practices with a dedicated team of solicitor accountants specialising in the needs of solicitors and legal professionals.

We act for a large number of law firms across all three of our offices and offer a wide range of services which are tailored to meet their individual needs. Our legal client base consists of a multitude of firms of varying structure and size, from sole traders to limited companies and LLPs with corporate members.

Our understanding of the unique issues that many in the sector are facing, combined with our technical experience, allows our solicitor specialists to provide you with proactive, commercial and informed accountancy and tax advice.