A legal regulator has warned law firms about a new wave of fraud costing the sector millions of pounds each year.
The Solicitors Regulation Authority (SRA), which published the report, urged solicitors to conduct proper due diligence when hiring new talent in order to avoid falling victim to the scam.
According to the SRA, fraudsters are approaching law firms under the pretext of offering to expand the services of the firm. The criminals will give false credentials to support their apparent expertise. However, after gaining access to the firm’s client money, the fraudsters will begin stealing the funds.
The SRA says it is often the smallest of law firms which become victim to this kind of fraud. The regulator says this may be because the fraudsters “think their apparent offers of assistance or new work will be more readily accepted.”
Included in the report are two case studies of recent frauds which led to potential losses of more than £7 million for those involved.
Unfortunately, these types of frauds are often in breach of SRA Accounts Rules, with the law firm failing to run their business in accordance with “sound financial and risk management processes” to protect their clients’ money and assets.
The SRA said these recent cases should stand as a warning for the added need for the profession to make sure that it carries out proper due diligence on those seeking to join a firm.
Commenting on the report, Paul Philip, SRA Chief Executive, said: “Many law firms handle large amounts of money, making them an attractive target for fraudsters.
“We know that most firms have strong systems in place to make sure they are employing the right people, as well as protections to make sure staff are properly supervised and money in the client account stays safe.
“But these recent cases show that there is no room for complacency and that undertaking careful due diligence for any potential employees is essential. Leaving the door open for fraud is damaging to both the firm and public trust in solicitors.”