SRA urges caution over new legal business partners
The Solicitors Regulation Authority (SRA) have urged solicitors to ensure that the credentials of people approaching their firm to offer business expansion are genuine.
The SRA have received two recent reports of firms branching out into different work areas, but the reality was that new colleagues had infiltrated the firm to defraud clients. The incidents have led to potential losses of more than £7 million for those involved.
The fraudsters approached law firms offering to expand the services they offered and gave bogus credentials to support their supposed expertise. However, once appointed and away from supervision, they had access to client money which appears to have been stolen.
Small firms are targeted. This may be because the fraudsters think their apparent offers of assistance or new work will be more readily accepted and that principals in those firms may not have been able to keep up to speed with warnings such as this one.
Solicitors have a duty to run their businesses in accordance with “sound financial and risk management processes” to protect their clients’ money and assets. Reports of infiltration highlight the need for the profession to make sure that it carries out proper due diligence on those seeking to join a firm.
There is also an obligation for solicitors to provide a proper standard of service to their clients. Taking on new staff for areas where managers do not have the relevant expertise could mean they might not be properly supervising employees.
Advice on carrying out due diligence for potential employees has been outlined in a number of case studies by the SRA.