Protecting against fraud in the legal sector

Following the high profile Mishcon de Reya case, Eclipse spoke to Modern Law Magazine to discuss how law firms can protect themselves against fraud. 

The Mishcon de Reya case has major implications for the legal profession as a whole, proving not only relevant to solicitors that deal with property transactions, but to any matters where funds are held in a client account for an intended transaction.

Regrettably fraud - and in particular property fraud - is on the rise within the legal sector. According to the NatWest 2017 Legal Benchmarking Report, of 269 firms surveyed 24% have been hit by cyber-crime or fraud within the last year, which could be a result of an increased pressure to reduce due diligence activities in order to cater for higher volumes of work.

Although fraud is a rapidly growing trend within the industry, there are a few fundamental steps to mitigate the risks:

• Workflow technology Unfortunately, and perhaps unfairly, solicitor negligence is often blamed for being the biggest fraud risk by lenders. Using the right legal software will provide the control required over working processes and practices - with minimal manual input from the team, and therefore a reduced risk of human error.

• ID, AML and KYC checks As part of any client inception process, reliable and accurate ID/AML checking needs to be carried out.
  
  Despite increased pressures, it's important that this isn't looked at as a 'tick-box' exercise - good case management software, such as Proclaim, will have the required integration with ID checking software, enabling buy solicitors to seamlessly conduct checks and receive instant verification of documents. 

• Lawyer Checker Following the above, verifying details of the law firm on the other side of the transaction - particularly when purchasing a property for a client - is a crucial step.
  
  This can be done via a number of databases, but perhaps the most thorough method is through Lawyer Checker. The online service allows a purchase conveyancer to gather information on the seller's conveyancer - specifically whether the bank details provided have a track record of use in conveyancing.
  
  Seamlessly integrated within Eclipse's Proclaim legal software solution, it enables searches at the click of a button.

• Educate your clients
  Clients don't always realise their actions aren't secure, yet it's law firms that are at risk of blame if clients' details are exposed. Firms therefore need to thoroughly 'train' clients on methods of communication and how best to use them. 

Unfortunately, the sophistication of fraud is ever-evolving and the repercussions to law firms are often disastrous. The greatest risks, however, can usually be eradicated by taking straightforward preventative measures and exercising extreme vigilance.