Stop Fraudsters from getting into your Firm!

It is well established that law firms need to take action to prevent money launderers from using their firm for the purpose of ‘cleaning’ their proceeds of crime. Allowing a money launderer through your system brings significant consequences: –

• A negligence claim or claims
• Increased insurance premium
• An enquiry or investigation by the SRA for failure to comply with the regulations
• Loss of a client or clients
• Negative publicity
• Potential prosecution

These consequences are significant and damaging to the firm.

With publicity indicating that billions of illegal funds are laundered through the UK, law firms are a prime target and in particular property departments.

In addition to this, where a fraudster is selling a property through identify theft (Dreamvar) the need to identify them is paramount.

Fraudsters and money launderers are becoming more sophisticated and law firms have to be equipped to combat their activities and prevent their firm and their clients from being the next victim.

Know your Client (KYC)

There is a lot of noise, and rightly so, about Anti Money Laundering and the need for law firms to comply with the AML Regulations. The SRA continue in their pursuit against firms that do not comply, with the SDT also taking action against firms and individuals for their failings.

Performing an AML search is an absolute requirement for matters affected by the AML Regulations but firms must not forget that the first step in Client Due Diligence (CDD) is Know Your Client (KYC) and they have to get this right!

Law firms are obliged by the regulator to identify clients – SRA Code of Conduct for Solicitors, RELs and RFLs – Code 8.1 “You identify who you are acting for in relation to any matter”.

This is a requirement that sits independent of the AML regulations, yet the level of importance attached to obtaining and verifying ID, for some, does not sit high enough on the priority list.

It is a fact that if your firm undertakes KYC properly you will stop the fraudster or money launderer from getting through your systems and involving your firm in their fraud or crime.

When an AML search is performed you are checking against the person who you think you are dealing with. If your security measures are insufficient and do not detect when someone may be using a stolen or fake ID, the AML check you perform will be useless as you are not checking the fraudster or money launder, you are checking the person who they are purporting to be.

A firm must get the basics right and they must ensure that the starting point of any matter is to comply with the required of Code 8.1 and identify their client and do so properly.

With the move to ‘online,’ it is easier now- than ever before – to falsify a document with most utility providers and banks turning to online communications, letters are becoming a thing of the past and although a document will have an address on it, it is unlikely to have been delivered to the recipient through the post.

With firms routinely accepting such documents, how is it possible to confirm it has not been tampered with? It is certainly much easier to alter an online document than it is a hard copy letter.

With regards to identification, it is of course harder to obtain fraudulent documents but not impossible with the quality of a ‘fake’ varying considerably but a copy of a fake is harder to detect.

The Future of Technology

With all these challenges what can and what must can a firm do?

There is no single or simple solution but the market that assists firms in identifying documents is becoming more sophisticated involving significantly more intelligent thinking to ensure you know who you are dealing with.

There already exists some very clever solutions in the market today but the development of improved and enhanced solutions will help increase a firm’s defences and ensure this critical element of fraud prevention is performed with the significantly improved success of revealing the fraudsters.

As tech businesses start to engage wider available resources, through the likes of social media and online accounts, to establish if a person really does live at the address they say or someone’s identity has not been stolen, the future for firms is starting to look brighter.

For the here and now, firms must attach more importance to the verification of documentation and not simply view this step as a tick box exercise, focussing their efforts more on the AML check.

Make sure the person you are dealing with is correct and the AML check you perform will be on the right person. Fail to do so and your AML check has zero impact.

Risk Management Solutions for Law Firms

At The Strategic Partner, we work with firms to enhance their defences through the implementation of robust policies and procedures that work. Our Standard, Risk Compliance and AML solution delivers firms an approach that protects them and includes a focus on AML policies and procedures, training for all staff and a risk assessment.

For as little as £215 a month a firm can be assured of compliance with the regulations and more than that will ensure their staff know what to do and when to protect the firm.

For more information on our risk and compliance products, you can click on the links below, visit our website or email us at info@thestrategicpartner.co.uk or call us on 020 3911 9710.

Our products provide firms with a robust outsource solution that is cost-effective.