SPECIAL FEATURE – Fighting fraud: practical considerations for law firms: LMS

SPECIAL FEATURE – Nick Chadbourne, CEO of LMS, has written an article on fighting fraud and the practical considerations for law firms.

New ONS statistics prove that the number of people falling victim to fraud relating to house purchases increased over the course of the last financial year. The reasons are two-fold.

Firstly, more consumers looked to capitalise on the stamp duty holiday resulting in a high number of transactions that needed to be pushed over the line quickly. Firms were working to process high numbers of transactions and scammers took advantage of a very busy period in which staff were still getting used to new tech. Secondly, the rapid speed at which the industry shifted to remote working in 2020 coupled with more sophisticated ways in which fraudsters target victims facilitated a global spike in fraudulent behaviour. It’s natural for law firms to be a significant target given the work they’re involved in, the data they hold and the money they handle.

Coupled with the ongoing shift away from face-to-face contact and increasingly sophisticated scams that make it much easier for any stakeholder to be impersonated, protective measures in this field are particularly important.

The growing problem now demands more efficient safeguarding procedures and a collaborative industry effort. The issue is not exclusive to individual firms, it is a collective issue that requires the innovation of all players within the industry. Lenders and legal professionals have a duty to protect customers and help them identify potential scams before it’s too late.

Internal processes

Before exploring external protective efforts, firms need to evaluate their own practices. They should look to incorporate technology that can help make all processes more robust while also developing a sense of fraud awareness amongst staff. This is necessary across all firms, so driving awareness through communication across the industry will certainly play its part.

Fraudsters’ main point of attack is usually via email. If targeting the conveyancer, staff falling foul of any malicious links believed to be from the customer or lender leave the firm vulnerable to scammers. Even at the most basic level, encryption is needed for a secure system, but more advanced technological upgrades are advised for maximum protection. There is also an important customer education piece to be done to ensure that they know who emails will come from, what they will look like and what information they will never be asked to give.

It is also important that firms consider the relationship between their risk management techniques and fraud prevention methods. As well as preventative methods to reduce the likelihood of scammers infiltrating systems and gaining access to information, firms should have a risk management framework to account for the failure of these systems and consider the wider impact unwanted access could have. The goal of risk management protocols is to act as a second line of defence should this happen and keep the business aligned with its original strategy.

However, often the greatest points of vulnerability are not within a business’s technical infrastructure but it’s the users of the technology themselves. That is why a robust programme of staff training and awareness raising is key. This is where collaboration across the industry will play a vital role – getting firms to communicate about the type of training that has been valuable to them and helping each other to implement it across the board will ensure the whole industry is on the front foot.

It is very often the case that fraud occurs on simple conveyancing cases. Staff receiving high volumes of cases may be asked to attribute risk levels to each case, but often workload means cases perceived as simple are not subject to the same rigorous checks and balances as more complex cases. Firms should look to apply a minimum standard to all files and can utilise technology to do so effectively, but it will only be as effective as the training in place for the people using it.

Verification

Improving internal measures is key to reducing the threat of scammers but incorporating external measures can provide further protection to sensitive data, specifically on financial transactions. Even with the security financial technology provides, implementing external safeguarding measures and verification processes for transactions ensures the door is fully closed on potential transaction scams.

One way of monitoring the legitimacy of transactions is through third-party checkers who can offer an expert overview. Such technology is being developed across the industry, including LMS’ Confirmly which harnesses specialist data to verify bank account details and minimise the risks associated with money transfers. Verification like this will significantly reduce the likelihood of transactional breaches, leaving both the firm and customer reassured.

Collaborative efforts

Fraud is clearly an industry-wide issue – although improving internal measures and implementing better verification methods might prevent the issue in the short term, collaboration will be the key to providing long-term solutions. The onus does not lie with one group, but instead on the entire industry to work together to protect consumers.

To do so, we need to change the narrative. While organisations may not want to highlight when they have been the victim of fraud, their knowledge and experience in dealing with it is critical for the industry to protect future organisations suffering a similar fate.

Take the airline industry – whenever accidents occur, the learnings are shared across every single stakeholder, changing policies and processes across the industry as a whole to reduce future risk. Many other industries, including ours, could learn a lot from this collaborative behaviour.

With hybrid working here to stay, there is a collective responsibility to work together and utilise existing technologies to manage the threat of fraud. Continuing to innovate and develop forward thinking technology needs to be front and centre, but ensuring internal processes are up to scratch and fully compliant as well as facilitating wider communication across the industry can help firms when it comes to implementing long term solutions that protect both the customer and, ultimately, their own reputation.