Autumn Update – Almost half of all reports to SRA On Bogus activity concern Identity Theft
On publishing their Autumn Update to the Risk Outlook the industry regulator states that they ‘remain concerned’ about the number of bogus law firms and risks that this poses.
Identity theft has been at the industry fore from the get go this month with the SRA placing the threat and risk of Bogus Firms and individuals at the top of the risk management agenda.
Within the Bogus Firms report — In the Shadows, law firms are encouraged by the regulator to "ensure they are dealing with a GENUINE SOLICITOR; solicitors are encouraged to – perform, verification checks even if they may think they are familiar with the firm."
Detailing a 20% increase in the number of reports of bogus law firms received by the SRA in the first eight months of this year and an increasing trend in cyber — crime; see: http://www.sra.org.uk/solicitors/freedom-in-practice/OFR/risk/resources/online-crime-legal-business.page it is little wonder that the regulator has now decided to sit up and pay attention to the fact that solicitors need to become more vigilant in the protection of client money.
The document states some scary figures; 454 reports were made in the eight months to the end of August 2014. And last year’s total of 548 bogus law firm reports itself represented a 57% increase on 2012.
The SRA state that: "Bogus firms increasingly use online methods to conduct activity." Within the statistics released almost half (46%) of all reports of bogus firms received this year involved the identity theft of a law firm or solicitor.
Frighteningly and perhaps most cautionary of those figures reported 93% of the said reports on identity theft were rated either red or amber by the regulator.
"This often involves the cloning of a genuine firm’s website. We have also noted an increase in individuals sending bulk e-mails, asking for money and confidential information, under the guise of being a solicitor or working for a genuine firm."
Of the remaining bogus law firm reports this year, the report found that 37% involved an identified firm or individual posing as a solicitor, 17% a fictitious firm or individual posing as a solicitor.
Most importantly it is now imperative for law firms to take ownership of their own risk regimen and to ensure that they take reasonable steps to protect their firm’s identity, themselves and their client’s money.
Making it very clear, the SRA said victims of bogus activity were not covered by the “normal regulatory protections”, such as access to the Compensation Fund, and law firms were under a duty set out in principle 10 of the Handbook to protect client money and assets.
Methods suggested by SRA:
- Regularly carry out internet searches using names of firms, partners and staff to check whether they were being used with authorisation.
- Ensure that details on the Law Society’s ‘Find a Solicitor’ web page were accurate and up-to-date, another to read warnings about bogus activity on the SRA website.
In a case study, the SRA describe how a couple buying an empty house were duped by an individual who managed to fake being the vendor’s conveyancer through using the name of a real bona fide law firm and simply changing some key information such as the law firm’s account number. A check such as a Lawyer Checker Account and Entity Screen (AES) search would have revealed that the account number provided was in fact not that of the recipient law firms. As a result the purchasers were left out of pocket and the negative press coverage about the matter meant that the law firm whose identity had been stolen suffered serious reputation and brand image damage, thus leading to a significant reduction in the number of property transactions undertaken.
Lawyer Checker’s AES search provides all conveyancers with the information they need to make an informed decision as to whether to transfer funds to the vendor’s conveyancer or to make further enquiries to the recipient firm themselves.
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