How to prevent financial fraud with Verification of Funds

Improve compliance and manage fraud prevention with verification of funds from InfoTrack. Find out how to manage risk in conveyancing with these tips.

Financial fraud continues to cause concern for law firms, especially in relation to conveyancing transactions. From an increase in Friday Afternoon Fraud to mounting pressure related to AML, the onus on law firms to prevent fraud is ever-present.  

Fraud has been found to be the cause of 41% of recorded crime in the UK, making it the most prevalent offence, based on data from September 2022. It's evidence like this that has driven the government’s decision to enact a new offence. 

The government recently announced that it has set out plans for the “failure to prevent fraud” (FTPF) offence contained in a recent amendment to the Economic Crime and Corporate Transparency Bill. Outlining a set of core fraud offences such as fraud by false representation, fraud by failing to disclose information, and false accounting, it will mirror existing failure to prevent fraud offences. 

With the risk of an unlimited fine for those found liable of an offence, it’s not worth taking your chances when it comes to appropriate fraud prevention measures during your transactions. Law firms can use a defence where they can prove “reasonable procedures” for the prevention of fraud were implemented. So, it’s crucial to ensure you have those procedures documented.  

The measure also creates a 'proactive information request power' for the Solicitors Regulation Authority in relation to economic crime, enabling them to request information from solicitors and their employees, recognised bodies and their employees and managers, for the purpose of an investigation. That means you’ll need to be able to provide evidence you have reasonable procedures in place to prevent fraud. 


When will the failure to prevent fraud offence come into force?  

The Economic Crime and Corporate Transparency Bill will first need to be approved by Parliament, at which point the government will need to publish guidance on ‘reasonable fraud prevention procedures’. Once this has been actioned, the offence will come into force. As yet, there is no date provided for when this will take effect. 

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How to provide evidence of reasonable fraud prevention 

You know the new offence is coming, it’s simply a matter of when. Being prepared is key and while the government hasn’t yet published guidance notes on fraud prevention procedures, there are ways you can begin preparing. 

So, how can you provide proof that reasonable procedures were in place to prevent fraud? 

Digital audit trails 

Technology already exists that can support how you prove you are taking reasonable steps to prevent fraud. Being able to easily supply that evidence if requested by the SRA can relieve some of the headaches that come with managing your compliance obligations.  

Digital audit trails are one of the easiest and most effective methods of demonstrating you have taken all reasonable steps to prevent fraud on a transaction. Using a detailed report showing activity completed on a matter, you can effectively provide evidence of all fraud prevention steps you took during the customer due diligence process, from ID checks and funds checks to AML searches. 

InfoTrack provides you with easy access to advanced reporting so you can prove you are employing all possible measures to prevent fraud. These can be supplied to the SRA, CQS, or even your PI insurer as evidence of how you’re managing risk


AML checks with an added layer of confidence 

AML is not within the scope of the Failure to Prevent Fraud offence, however AML checks are an essential function of fraud prevention and even more pertinent in the current climate with PEPs and sanctions related to the Russia Ukraine conflict. The SRA announced earlier this year that the pressure around AML checks will not ease in 2023. 

Using One-click AML within eCOS means you are completing the AML check against an ID you’ve just verified digitally, so you know it’s legitimate. With the addition of ongoing monitoring for 12 months, you’ll be kept informed of any changes to the status of that client’s AML profile. 

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A three-tier financial verification process 

Financial fraud is one of the most common threats for conveyancers, which is why a robust risk mitigation plan is essential. For a complete picture of your client’s finances, you need to consider three things; proof of funds, source of funds, and source of wealth. This provides a comprehensive check to ensure you know they have the money available, where it came from, and how they obtained it. 

Without this clarity and knowing not just that your client has the funds now, but where they came from, you could be leaving yourself open to risk. 

InfoTrack gives you access to all this information within our Verification of Funds solution, saving you from having to obtain the data from multiple sources. Giving you access to all the necessary information in one place with the supporting documentation, such as bank statements, you can rely on Open Banking technology to reduce the risk of fraud.  

Verification of Funds also provides detailed analysis of your client’s finances and flags any inconsistencies or missing information so you can ensure you can request further information to gain clarity around where their funds are coming from. All of which can be used as evidence to show you’ve taken reasonable measures to prevent fraud. 


All your client onboarding information in one place 

To make it easier to gather evidence if required to show you’ve taken all the right steps to mitigate the risk of fraud, eCOS is a complete digital client onboarding solution. Bringing together ID checks, Verification of Funds, AML, and onboarding forms, it’s one place for managing your fraud prevention processes.  

Simplify the onboarding process through a user-friendly portal that helps make managing fraud risk easier. With the ability to access reports and digital audit trails as evidence, eCOS from InfoTrack supports more than 20,000 workspaces every month. 


Preparation is essential 

Law firms must prepare early, or risk being caught out once the new “failure to prevent fraud” offence comes into force. Taking action now to instil a robust and effective fraud prevention process will mean you’re ready.  

It’s one thing to have procedures in place, but with the additional power that will be attributed to the SRA to request proof, you need to ensure you have policies and processes in place within your firm to make this as simple and hassle-free as possible should you ever be called upon.   

Make sure you’re prepared before it comes down to the wire and speak with one of our digital onboarding specialists today.  

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Published 04/5/2023
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