Editor's blog | Porous Systems

With their eyes locked on alternative business structures and the threat of Tesco law high street firms have lost sight of a more pernicious threat to their business: the porosity of their systems.

The greatest danger for smaller firms is not alternative business structures, it's complacency. Letting seemingly innocuous slack seep into the systems, taking shortcuts, being over confident that your firm is different from everybody else's.

It can be a minor change that will save a bit of time here or there and which you think won't have an effect on the robustness of your systems. A small chink which you think won't really matter but can, before long, turn into a major gash in the fabric of your firm.

And so with property fraud. A startling number of conveyancing firms '“ 75 per cent '“ believe they are unlikely to experience this kind of fraud, according to SRA research seen by Solicitors Journal. Yet, 1 in 4 say they have come across it.

What's more, conveyancing fraud now accounts for about half of the value of professional indemnity claims against solicitors. In the past five years payments from the Compensation Fund more than doubled, rising from £9.23m in 2008 to £21.2m in 2012.

The regulatory burden has been tightening over the same period, with new money laundering regulations coming into force. And the arrival of COLPs and COFAs in the new year should ensure keener compliance, but those figures are puzzling nonetheless.

But if firms do not think they are likely to be taken in by fraudsters, they are also less likely to be on the lookout and take an active approach to protecting themselves.

Adherence to professional standards through kite marks or membership schemes is one possible way forward.

Now, this journal is yet to be fully convinced of the value of individual quality schemes. Much as the principle is founded on a reasonable objective, the idea of a plethora of schemes depending on practice areas is not entirely satisfactory.

This leaves Lexcel. There is probably more life in the Law Society's practice management standard than its bland description suggests. It needs to be transformed from a static management tool into a proper risk management and business support. Its potential is yet to be fully exploited. A change of name could be a good start.

But when only 2 in 5 conveyancing firms are members of a scheme '“ Lexcel or the Law Society's Conveyancing Quality Scheme '“ this raises worrying questions.

Either professional bodies are failing to come up with a suitable solution or the profession is failing to grasp the reality of the situation. Either way, firms will have to start taking the issue a lot more seriously.

Copyright & permissions