Fraudsters are targeting law firms with offers of new work to to get their hands on client money, the Solicitors Regulation Authority warns today. Solicitors are reminded to check the credentials of people approaching them with offers to expand the business.
The SRA has received two reports of firms branching out into different work areas where in reality new colleagues had infiltrated the firm to defraud clients. The incidents have led to potential losses of more than £7m.
The fraudsters approached the firms offering to expand the services they offered and gave bogus credentials to support their supposed expertise. However, once appointed and away from supervision, they had access to client money which appears to have been stolen.
SRA chief executive Paul Philip warned that there is ’no room for complacency’ and that undertaking careful due diligence for any potential employees is essential. Small firms in particular are being targeted.
Approaches of this type, particularly if it unsolicited, need to be treated with ’extreme caution’, the SRA adds. Carrying out due diligence would include:
- Getting as much verification as possible from third parties such as banks and other professional firms. One check or reference from another firm is unlikely to be sufficient because the fraudsters may control or have influence over more than one firm.
- Internet searches
- Checks on official websites such as the SRA and other regulators.
Solicitors should also be aware of unusual aspects to the proposal. This could be someone bringing work to the firm saying that they will pay the sole principal or partners a ‘salary’ from the new work they bring in.
In a separate warning yesterday, the SRA urged solicitors to check the HM Treasury frozen assets review to make sure they are not holding monies belonging to a client subject to financial sanctions. The Treasury launched its annual frozen assets review this week and anyone holding frozen assets has until Friday 12 October to submit a report to the Office of Financial Sanctions Implementation.