Spotlight on SRA Spring Risk Outlook 2014 saw annual increase of 25% in bogus firms reported

Lawyer Checker200Last month saw the SRA release their Spring Outlook which again drove home the clear messages of the continuing misuse of money and assets, the remaining risk of cyber-crime and bogus firms, and that money laundering is still a major industry problem.

The document revealed that things have changed little since Autumn with poor financial controls continuing to ‘provide opportunities for financial misconduct to occur.’

Within the update, the regulator states that they have seen recent cases where ‘poor systems and controls have been a factor in the misuse of money or assets’ citing that the root of the problem lies in failures of training and supervision as well as failure to control access to accounts.

The SRA are now well into their assessment of a number of firms who are subject to the auditing of their current AML processes; and this most recent Risk Outlook was no stranger to having Money Laundering as a key component of its report.

It is not, and never has been, a proper part of a solicitor’s everyday business or practice to operate a banking facility for third parties whether they are clients of the firm or not.

A resonating reminder that 14.5 of the Solicitors Accounts Rules 2011 provides that:

“You must not provide banking facilities through a client account. Payments into, and transfers or withdrawals from, a client account must be in respect of instructions relating to an underlying transaction (and the funds arising therefrom) or to a service forming part of your normal regulated activities.”

Drawing headlines again, more than 700 reports of bogus law firms were made to the SRA in 2014; representing an annual increase of over 25% – a huge rise revealed by the report. This rise, it said, mirrored a rise in rogue traders across the economy in the UK.

How can this threat be mitigated?

As recently as 2013 the threat of Bogus Firms was not even identified as a risk; fast forward only two years later and it is considered by the industry as one of the top ones to watch.

These statistics are sobering, especially for an industry which has inherently been a collection of veracious individuals; a trusting community. With the advent of the cyber-criminal, the rogue trader who is all too happy to attack the plentiful funds that residential transactions offer, the ultimate result is an attack on the law firm, the conveyancer and the client.

Being a conveyancer in today’s environment is a risky business indeed – the need for coherent processes which demonstrate due diligence in line with Outcomes Focussed Regulations is the only way a firm and its conveyancers can protect themselves against this very real threat and not to have to rely on s.61 relief which ultimately does not now offer the protection it has historically.

By being pro-active, and obtaining the recipient solicitor’s client account details at the earliest juncture in a transaction, conveyancers using Lawyer Checker’s Account and Entity Screen (AES) as part of their risk management process will be able to make an informed decision about the transfer of client money.

Offer your clients a 21st century service which they and you can rely on to enhance due diligence. Where monies are to be remitted to another firm, regardless of how well you think you know a firm, integrate a Lawyer Checker AES search into your firm’s operation enabling an informed decision, along with your firm’s COLP, to be made.

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