Hallmarks of fraud?

Hallmarks of fraud?


Fraudsters and scammers are now a part of everyday life, but lawyers can't allow themselves to become too suspicious of their own clients, writes Susanna Heley

The Legal Services Consumer Panel’s recent report on consumers’ experience of solicitors suggests a need to build up public trust in the profession to ensure that legal needs are met. Although the headlines have focused on the conclusion that BME consumers are less well served than their white counterparts, the statistics reveal a common discrepancy between the perception of individual lawyers and that of the profession.

Many distrust lawyers as a profession although satisfaction with individual lawyers is generally higher. One might assume, therefore, that the perception of the profession is not necessarily driven by individual experience of instructing lawyers. One may, perhaps, go on to imagine that such pervasive distrust of the profession is based on media coverage and exacerbated by reports of solicitors engaging in wrongdoing.

It may be somewhat ironic, then, that the report is published at a time when the Solicitors Regulation Authority has taken the unusual step of issuing a warning to the public about the risks of solicitors being involved in investment fraud. The SRA justify their warning by citing the rising incidence of investment fraud and the suggestion that £100m has been lost to fraudsters who have used solicitors to lend legitimacy to their schemes.

The SRA highlights two examples of recent prosecutions where solicitors have been involved in ‘dubious’ schemes. What the regulator doesn’t highlight, of course, is that when solicitors are prosecuted for involvement in investment fraud, there does not have to be any proof of actual fraud. The SRA does not have to show that the scheme is a scam; it merely has to show the scheme bore hallmarks of fraud such that it was improper for a solicitor to be involved. Pleadings in such cases routinely contain phrases such as ‘the SRA does not have to show that there was fraud’. The case is different of course where a solicitor is subject to criminal prosecution in relation to fraudulent schemes.

As far as the SRA prosecutor is concerned, the bona fides of any scheme are not particularly relevant to the question of whether or not there has been misconduct. The issue from the SRA’s standpoint is whether or not the solicitor could or should have spotted hallmarks of fraud and the extent of the due diligence undertaken. There does not have to be proof of loss, nor of any client complaint. Indeed, clients may be perfectly content with what the solicitor has done. It is the case, therefore, that solicitors may be prosecuted for acting in perfectly legitimate transactions if they are unable to demonstrate – sometimes many years after the fact – that they conducted sufficient investigations to satisfy themselves of the bona fides of the scheme. It is no defence to say that there have been no client complaints (although it may be mitigation).

In itself, there is little remarkable about this. The SRA has been prosecuting solicitors in this way for many years. However, one does have to wonder whether there is a sufficient evidential basis for the SRA’s stance, not only in relation to issuing its warning (which, in fairness does attempt to suggest that most solicitors are trustworthy while flagging warning signs), but also in relation to issues such as the impact of altering the standard of proof in disciplinary proceedings, a central (although entirely unsupported) plank in the much maligned report of the Insurance Fraud Taskforce published at the beginning of the year.

We are frequently warned about fraud these days. Daily warnings on TV, advertising campaigns, warning notices. Fraudulent emails and scams are a part of daily life. Even the SRA’s website has sections dedicated to fraud warnings in relation to those who seek to impersonate genuine solicitors or use the ‘solicitor’ title for fraudulent purposes. It is a significant issue but we shouldn’t allow ourselves, as a profession, to become so cynical that we can’t allow for genuine transactions.

Just because something is unusual doesn’t mean it’s fraudulent. It might just be innovative. And if we allow ourselves to become too suspicious of our own clients, to cross examine and doubt their every assertion, how on earth can we expect them to trust us?

Susanna Heley is a partner at RadcliffesLeBrasseur

@RLB_LAW www.rlb-law.com