Reports of cybercrime from law firms reached record levels in the first quarter of this year, the Solicitors Regulation Authority (SRA) has said.
The figures are contained in the regulator’s latest Risk Outlook, which for the first time includes questionable investment schemes involving solicitors.
The SRA said there were 45 reports of cybercrime from law firms in the first quarter of this year, compared with only 19 in the last quarter of 2016. The previous high was 35 in the second quarter of last year.
The amount of money reported to be stolen in the first quarter of this year, £3.2m, was also a record. It was up from £3m in the final quarter of 2016, and only £1m in the first quarter of last year.
The SRA said 60% of cybercrimes involved some form of email modification fraud, and around half involved conveyancing.
Earlier this week, more than a quarter of SME law firms told the Law Society they had been targeted by scammers in the previous year, with the figure growing as firms got larger, to 50% of firms with 5-10 partners and 64% of firms with 11-25 partners.
The SRA said email modification fraud happened when criminals contacted the solicitor using a stolen or falsified email address, and asked for their bank account details to be changed.
“They usually do this at short notice and when there is time pressure, for example on the afternoon of a property completion. The solicitor sends the monies to the new bank account and this is quickly moved on by the criminals.
“We also see cases where the criminal impersonates the law firm and tells the client that the firm has new bank details. In these cases, the client sends the deposit and other monies to the fraudster’s bank account.”
The SRA said ways of tackling this included exchanging bank details with the client and third parties at the start of the transaction, including the other party’s conveyancer, and making it clear that they will not change under any circumstances, or training staff to verify emails that ask for a change in bank details by speaking to someone on the phone at a previously known number.
On dubious investment schemes, the SRA said the public had lost more than £50m in the last nine months by investing in schemes involving a solicitor.
The regulator said that although “very few solicitors would ever knowingly become involved” in these schemes, there had been cases where they acted for promoters, for potential investors, or both.
The SRA said examples where solicitor or law firms had been used to legitimise questionable schemes included newly built or ‘off plan’ property abroad, hotel room leasing, bank instrument trading, carbon credits and diamond trading.
“It is possible to buy and sell some products used in questionable schemes (such as diamonds) through established markets.
“But many products offered in investment schemes are not suitable or genuinely available for ‘investment’ by members of the public. It is highly unlikely they will produce anything like the kind of profits stated by promoters.”
The SRA said reports of law firms providing banking facilities through client account had also increased over the last three years, with 32 reports in 2016, and these reports could lead to the discovery of a questionable investment scheme.
Meanwhile the SRA said the number of money laundering reports “remained static” at around 175, a similar figure to the previous year, which saw a 20% increase.
“One third of all anti-money laundering issues reported over the last three years relates to residential conveyancing, three times more than any other field of law.”
Paul Philip, chief executive of the SRA, commented: “We have included one new priority risk this year – questionable investment schemes.
“We know that the numbers of solicitors who would willingly get involved are very small, but the harm to the public and potentially the reputation of the profession is significant. We want to help everyone recognise and avoid these dubious schemes.”