Report calls for tougher action against dishonest solicitors

Report calls for tougher action against dishonest solicitors

The Insurance Fraud Taskforce has published its final report and among its many recommendations is a call for the Solicitors Regulation Authority (SRA) to get tougher with dishonest solicitors.

The report stresses that insurance fraud is not victimless and pushes up the cost of insurance for honest consumers; funds the wider activities of criminal gangs; and puts pressure on essential public services, such as the NHS and courts. The report states that “Contrary to the perception of many of those who commit fraud, they are not stealing from a faceless corporation. The costs are paid by their friends, families and neighbours through higher insurance premiums.

The report puts forward the view that the SRA has a key role in tackling premeditated fraud, and that whilst the majority of claimant solicitors are honest and competent, fraudulent claims can often be enabled either through incompetence, or by deliberate and dishonest behaviour. It is alleged that there are even some cases where law firms are set up by criminal gangs to assist them in their scams.

The report goes on to say that the SRA clearly has a duty to tackle dishonest or negligent solicitors and that not doing enough is being done either to take enforcement action against solicitors involved in fraud nor to give guidance to solicitors as to what checks claimant solicitors are required to carry out for their clients in PI cases.

The SRA has stated that although appropriate fraud protection and anti-money laundering checks are not stipulated, they are implicitly covered by their general principles. However, the SRA has raised concerns that its enforcement and fining powers are not consistent with those of other regulators such as the FCA, CMR and ICO. For example the SRA can currently fine alternative business structures £250 million but can only fine a traditional solicitors’ partnership £2,000. Higher fines or “striking off” require a prosecution before the independent Solicitors Disciplinary Tribunal (SDT). While the SDT has unlimited fining powers, it considers cases on the basis of the criminal standard of proof, meaning the case must be proven beyond all reasonable doubt. That makes it difficult to impose high financial penalties and more importantly means that those who are dishonest on the balance of probabilities (the civil standard of proof) can continue to practice. This undermines the strength of the regulator, and means its enforcement actions may not act as a credible deterrent.

The report also suggests that the SRA should make greater use of its ‘naming and shaming’ powers which can act as a powerful deterrent. Reputational damage can be highly effective in discouraging premeditated fraud, as can highlighting the consequences and impact of fraud on others. Whilst recognising that the SRA has a difficult task, the report suggests that if insurers were to share intelligence and data with the SRA, it would make them much more effective in identifying and challenging fraudulent firms.

The full report is available on the GOV.UK web site at www.gov.uk/government/publications/insurance-fraud-taskforce-final-report

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