Money, Its Movement And Its Implications

I wanted to share my thoughts on potential threats to the legal sector in my own “left field” sort of way. I am going to focus on probably the most important factor of daily business, money.

Legal firms have some of the most stringent guidelines to adhere to when funds move through client accounts. Not for you a mere shrug of the shoulders when something like a charge back fraud occurs, or illicit funds are used to purchase goods and services. No, for your business a thorough investigation with potential regulatory consequences could be on the cards, and perhaps increased insurance premiums, not to mention reputational damage and potential adverse publicity.

Just imagine if every second-hand car dealer handling cash had to jump through the same hoops as you? Wormwood Scrubs would be stuffed full with Arthur Daley types and their “Nice Little Earners”!

When it comes to money legal firms are doubly at risk. The criminal fraternity can attempt to get their ill gotten gains into your business in order to launder it and because your business transfers large amounts regularly through private client accounts, stealing these client funds are equally attractive. Building an effective strategy to counter both these threats is crucial.

Knowing your customer and validating their identity in order not to launder criminal funds is as you all know defined as “Taking a Risk Based Approach”. For those of you who’ve attended one of my interactive sessions you’ll know this is a something of a contentious issue, both for me as a presenter and for audiences.

There are no clear guidelines given by any regulatory authority or the judiciary on what is or is not sufficient. For example, no practical advice was offered to firms by the courts on how to identify, counter or mitigate the risk of the forged and/or counterfeit documents supplied in either the Purrunsing, Owen, Waite & Catlin or Mischon De Reya seller fraud cases.

There are some striking similarities to the three cases brought before the High Court (and not as was reported in the press of who was at fault and who blamed who, but the gaps in the systems exploited by the criminals who committed the frauds). Analysing these system gaps may assist your own business from enduring a similar fate.

Turning to the threat of having client funds stolen now, the firms that I’ve worked with all have very good IT security systems, as indeed it is correct to say have most legal entities, and yet firms continue to be attacked and some defrauded. How is this possible when firewalls and other anti-virus software systems are up to date?

My love of Welsh rugby is I think well known to audiences! The blistering pace of Ieuan Evans was a sight to behold, but for this article I want you to think about his astounding side steps as well as those of Phil Bennett, Arwell Thomas and of course Shane Williams.

Social Media is the side step here though. Posting where you are and what you are doing allows criminals the opportunity to side step security systems, which can be as devastating as Ieuan Evans was.

Posting that you’re going to the golf course for a couple of hours, gives rise to bogus emails being sent into accounts departments requesting funds transfers. Don’t think it would happen? This is an actual example of a business I’ve advised post fraud. Now I fully appreciate those readers who can say with confidence that their accounts departments would never do this, but the point from the criminal’s perspective is, if they cast their net wide enough, and one firm responds a crime occurs.

What about your clients? They will post absolutely everything online about their lifestyles, such as their new property, how much its cost, when its due to complete and sometimes even the names of the “lovely estate agent ………” or conveyancer ………”.

Posting divorce details online as some sort of revenge is another, as well as obituary information. All this information is harvested by criminals. Clients therefore unfortunately instigate much of their own downfall possibly taking firms with them in the process. So should we as an industry advise clients not to leak so much information that can be utilised? This is going to be one of my own debating points over the coming months.

It’s not all doom and gloom though readers! Innovative technology continues to come to market to counter crime. For example, for those of you I’ve electronically pick pocketed in one of my sessions, there’s an excellent range of wallets, purses, and credit card covers/cards that absorb the NFC signal (Near Field Communication) that I’ve been field testing. Great fun testing when the contactless card reader won’t allow you to pay for your coffee!

I thought I’d finish by manipulating a famous investment quote that should remind you to keep pace with changes to both your risk mitigation strategy and new crimes trends:

“The value of your business may go down as well as up. Past anti-fraud performance is not necessarily a guide to future security and you may lose some or all of your credibility”

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