Client Due Diligence – Do you take clients on face value?

The solicitor, who was the Head of Conveyancing at the firm where he worked, reached an agreed outcome with the SRA, which meant the case did not need to be taken to the Solicitors Disciplinary Tribunal and was fined £20,000 and ordered to pay costs of nearly £4,000.

The solicitor was duped into accepting that a woman was who she said she was because he did not require documentary evidence, which meant that he unwittingly helped a man fraudulently borrow against a property owned jointly by his ex-wife. He did not carry out due diligence on either the husband or the imposter purporting to be his ex-wife.

The solicitor met with the husband and said that he needed to see his ex-wife as well so he could witness their signatures on a loan agreement, however, the husband said that she could not attend as she was attending another appointment; on realising he was not going to be able to do what he wanted he went away and attended later with the imposter who he said was his ex-wife. No identity checks were carried out on the two people attending the office.

As the loan could not be processed by the lender without both signatures the solicitor told the ‘ex-wife’ that she would need to present her identity documents so he could then witness both signatures; the ‘ex-wife’ promised to do this at a later date so on this basis the solicitor signed the loan agreement as having witnessed both signatures.

On arrival from the lender the approved loan was paid by the solicitor into the husband’s bank account.

It was only when the lender demanded repayment of the loan some months later that the fraud was identified; the ‘real’ ex-wife was still living at the property on which the loan was agreed so got to see the lender’s letters.

The Consequences

It is unlikely we will ever find out what the consequences were beyond the agreed outcome, but one can guess what they were likely to be, for example:

• Loss of Conveyancing Quality Scheme (CQS) accreditation
• Loss of lender panel positions
• Increased professional indemnity insurance premiums or loss of cover
• Loss of reputation
• Loss of position

CQS is a key accreditation for conveyancing firms, as without it most lenders will not allow firms to act on their behalf or that of their customers, so ensuring all appropriate standards are maintained on a continual basis is essential. 

 

Five steps you can take to protect your firm

• Follow the CQS Protocol and the Core Practice Management Standards (CPMS)
• Ensure all staff dealing with conveyancing matters are appropriately trained
• Follow policies and procedures in relation to client due diligence and anti-money laundering
• Comply with lender requirements
• Carry out risk-based file audits on all staff

This case clearly shows the need for supervision of staff at all levels; it cannot be taken for granted that someone who is regarded as senior and very experienced will be doing everything as they should!

How we can help

As an approved Law Society provider of CQS training, we can assist you in meeting your CQS competency requirements; we can also provide you with other compliance products and services, including:

• A learning management system that can help you track staff training
• A risk register that can help you track key risks, for example, loss of CQS and lender panel positions
• A file audit module that enables you to track compliance on client matters
• An independent file audit service
• CQS accreditation review

Learn more about our Risk and Compliance systems and reduce your risk.

 

Alternatively, get in touch now for more information about how we can help you ensure your firms is protected.