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Know your fraud

CA Affiliate member, Lawyer Checker, sets out how it is important to be aware of the potential for fraud regardless of the client.

Trust is given readily when you are dealing with a regular contact day in day out, however when it comes to online activities should this still be handed out so willingly? Sophisticated, and indeed not so sophisticated fraudsters, have no qualms about targeting the multitude of law firms within England & Wales and with higher success rates than you might expect.

Fraudulent activities are an ongoing threat to the legal industry. The latest case of conveyancing fraud highlights a prime example of the need to stay vigilant against the opportunistic scamstargeting the hundreds of thousands of pounds changing hands within the conveyancing sector on a daily basis.

The recent Purrunsing case, one that you may already be familiar with, has put many COLPs and COFAs on high alert. A criminal impersonating the registered owner of the property convinced Purrunsing’s conveyancers to transfer the full value of the property. The amount of £470,000 then passed through to a bank account in Dubai. Both the purchase and vendor conveyancers were held liable for breach of trust in this case, and were not entitled to section 61 relief. The court said remuneration had to be made in full in equal amounts by the two firms in question.

Utilising quality risk management procedures, as well as adhering to Principle 10, would have enabled fraudulent activities to be mitigated. The judge ruled insufficient endeavours were made by the firm to comply with Anti-Money Laundering (AML) regulationsand there was a clear failure to obtain documentation connecting the seller to the property. Monies are still yet to be recovered by Purrunsing, who claimed for breach of trust against his solicitors as well as a breach of trust and negligence against the vendor conveyancers.

More than ever it is becoming clear that knowing your client and acting in good faith does not satisfy the necessary level ofdue diligence when performing checksprior to a transaction being processed. It is your responsibility to perform any additional checks to make sure that you are protecting yourself and your business as well as the client. The key to self protection is understanding who you are dealing with at all points during the transaction; take time to assess your clients profile and gather as much information as possible to establish the legitimacy of your client and the transaction in question.

Just because your relationship with the individual starts off with the best of intentions does not mean that it cannot become compromised over time. It is key to monitor behaviour and performance of clients at all times. Background checks are essential to making sure that you are up-to-date with the relevant information. There are various preventative methods already present within the market as well as basic measures (such as frequent training of staff) that can be taken to deter criminals from choosing your firm over others.

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