Law makers and prosecutors, not regulators, need to change their approach
Nearly five years after the recession started and solicitors raised concerns about conveyancing fraud, it seems the regulators have finally decided to get to grips with the problem.
We have yet to hear precisely what they will be looking at, let alone what they will be proposing. But what we do know is that the Legal Services Board is finalising an internal paper on risks in the conveyancing sector, for consideration at its board meeting next month. And as we were going to press the Solicitors Regulation Authority confirmed that they too were putting the final touches to a report they were hoping to release within the next fortnight.
But quite apart from the fact that any useful decision is unlikely to be made for a while, the question is what could either the LSB or the SRA do to stop conscientious conveyancers from being prosecuted for criminal offences.
Lenders, being on the financial frontline, were first to raise the alarm as the number of fraudulent transactions started to increase, but it was solicitors who ended up defending claims of negligence and prosecuted for failing to spot or report fraud.
No doubt the LSB, SRA and even the Law Society can provide helpful guidance and set exacting professional rules for solicitors. In theory, the higher the standards, the less likely it is that lawyers will fall foul of regulatory and legal requirements.
But this doesn’t remove the risk from the equation, and, as long as the duty to run money laundering checks rests on solicitors, they will be the ones facing criminal charges when fraud is discovered. At the moment, the buck stops with them, and there is nobody else to pass it on to.
Anti-fraud procedure has been tightened but fraudsters are becoming cleverer too. As basic fraud types disappear, other sophisticated ones are developed that are much more difficult to spot. Faxes and electronic communications have only compounded the problem. A conveyancer at one end of the country may be instructed by a client at the other. Checks are made electronically, identification documents are faxed and phone calls are made to individuals believed to be the clients but later turn out to be different persons.
A process designed to provide built-in safeguards ends up putting solicitors at risk. The problem potentially gets worse in large conveyancing sheds where pressure to push high volumes of work in progress through the pipeline increase the risk of oversight further.
Ultimately, this is not a regulatory issue. As long as failure to comply with money laundering legislation remains a criminal offence for which conveyancers remain liable, no amount of regulator guidance will help.
Practitioners could take some comfort that they might escape the SDT if they can show they have acted professionally throughout and that other solicitors with the same level of experience as them would have done the same. But this will be of little use if they still end up in the dock for breaches of money laundering legislation.
At present a solicitor sued for negligence could escape civil liability and professional death but not criminal liability. What is needed is either a new policy or a change in the law so that a more common sense approach prevails.