Solicitors have been urged by the UK's Solicitors Regulation Authority (SRA) to make sure that the credentials of people approaching their firm to offer business expansion are genuine.
The SRA has received two recent reports of firms branching into different work areas, but the reality was that new colleagues had infiltrated the firm to defraud clients. The incidents have led to potential losses of over £7 million for those involved.
The fraudsters approached law firms offering to expand their services and gave bogus credentials. However, once appointed and away from supervision, they had access to client money which appears to have been stolen.
The fraudsters appear to have targeted small firms, perhaps because they believe offers of assistance or new work will be more readily accepted.
Solicitors have an obligation to provide a proper standard of service to their clients, and taking on new staff for areas where managers do not have the relevant expertise could mean that employees are not properly supervised.
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.
Solicitors have a duty to run their businesses in accordance with “sound financial and risk management processes” to protect their clients’ money and assets. Reports of infiltration highlight the need for the profession to make sure that it carries out proper due diligence on those seeking to join a firm.
“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.”
Approaches of this type, particularly if it unsolicited, should be treated with caution. Carrying out due diligence includes:
-Getting as much verification as possible from third parties such as banks and other professional firms.
-Checks on official websites such as this one and those of other regulators
Solicitors should also be aware of unusual aspects of the proposal, such as someone bringing work to the firm or saying that they will pay the sole principal or partners a ‘salary’.
The reports of infiltration are still being investigated and therefore no further details on these cases can be released at this time.
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