Fraud risk assessments and training
Fraud and financial crime are a growing threat to UK law firms. They are not merely a hypothetical risk, they are in fact accelerating on multiple fronts.
A recent survey found that 48% of UK regulated firms, including law firms, saw an increase in financial crime attempts in 2023, representing a 34% increase from 2022, while more than a quarter (26%) reported actually falling victim to such criminal activity.
The current state of affairs
Between Q3 2023 and Q2 2024, the UK legal sector saw a 39% increase in data breaches, rising from 1,633 to 2,284 reported incidents, resulting in the compromise of information belonging to a massive 7.9 million individuals, or around 12% of the UK population.
Notably, external breaches have escalated, now comprising 50% of incidents, with phishing attacks accounting for 56% of these external threats. Yet insider-related incidents remain a major concern – half of all breaches originated internally, and 39% of those were attributed to human error, including misdirected emails or improper redaction. Together, these figures make it clear: UK law firms face escalating threats from both traditional financial crime and sophisticated cyber fraud.
Against this backdrop, the introduction of the Economic Crime and Corporate Transparency Act 2023, which came into force on 1 September 2025, now makes ‘Failure to Prevent Fraud’ a corporate offence.
Why your law firm needs a fraud risk assessment
If the above is not sufficient to convince you that your practice needs a fraud risk assessment, let’s take it back to basics.
- Fraud and financial crime are growing threats for UK law firms. With client money, sensitive data, and complex transactions at the heart of your work, you are a prime target for fraudsters. A single incident of fraud can result in financial loss, regulatory penalties, and lasting damage to your reputation.
- Carrying out a fraud risk assessment helps your firm identify vulnerabilities, strengthen internal controls, and demonstrate to regulators and clients that you take fraud prevention seriously. It is also an effective way to meet your obligations under the Solicitors Regulation Authority (SRA) Standards and Regulations and the Money Laundering Regulations 2017.
- Finally, failing to prevent fraud is now a corporate offence, per ECCTA 2023. As a defence to this, there are reasonable procedures that large firms need to introduce – including fraud risk assessments, counter-fraud training and introducing effective fraud prevention policies. Fall foul of the legislation and risk unlimited financial penalty, criminal conviction, reputational damage and the lost business that goes along with it.
Why this is of particular importance to CQS accredited firms
Law firms undertaking conveyancing work are particularly vulnerable to fraud, with so-called “Friday afternoon fraud” – where criminals intercept client funds during high-value property transactions – continuing to be one of the most common and costly threats.
For CQS-accredited firms, the Core Practice Management Standards make it clear that robust fraud prevention is not optional. Practices must maintain a documented and up-to-date fraud risk assessment, carry out enhanced identity checks in high-risk cases, and evidence a fraud risk assessment on every conveyancing file. Procedures must also cover checks on the bona fides of the other side’s conveyancer, supervision of high-risk transactions, and staff training on property and mortgage fraud.
A tailored fraud risk assessment ensures your firm not only meets its CQS obligations but also protects both client funds and professional reputation in an area of practice that remains a prime target for fraudsters.
What exactly is a Fraud Risk Assessment?
A fraud risk assessment is a structured review of the risks your law firm faces from fraud, financial crime, and regulatory breaches. It examines your clients, services, processes, and systems to highlight areas of vulnerability. The outcome is a clear picture of where risks exist and practical recommendations for reducing exposure.
What are the benefits of a Fraud Risk Assessment for legal firms?
- Regulatory compliance – meet SRA and AML obligations.
- Client protection - safeguard client money and sensitive data.
- Reputation management - show clients and insurers you have robust controls
- Insurance resilience - strengthen your position wih professional indemnity insurers.
- Operational security - prevent disruption from fraud or cybercrime.
What key areas does a Fraud Risk Assessment cover?
When carrying out a fraud risk assessment for a law firm, we review risks across your people, processes, technology, and clients. This typically includes:
- Client and matter risks - identifying high-risk clients, politically exposed persons, overseas transactions, and services vulnerable to money laundering or fraud (such as conveyancing or trust work).
- Financial risks - reviewing client account controls, payment processes, billing practices, and how funds are transferred to minimise opportunities for fraud.
- Cyber and data security - assessing the risks of phishing, email spoofing, hacked systems, and insider misuse of confidential information.
- Staff and internal controls - checking for robust recruitment screening, segregation of duties, conflict of interest management, and whistleblowing procedures.
- Third-party and supplier risks - considering risks posed by introducers, referrers, contractors, and outsourced service providers.
- Regulatory and compliance risks - ensuring compliance with SRA requirements, AML regulations, and sanctions obligations.
- Culture and training - reviewing whether your team receives regular training, understands red flags, and feels confident reporting concerns.
Protecting your firm against fraud
A fraud risk assessment is more than a compliance exercise – it is an essential tool for protecting your law firm, your clients, and your reputation. By identifying risks early and strengthening your systems and controls, you reduce the likelihood of fraud and demonstrate to stakeholders that you are proactive about financial crime prevention.
Are you ready to take the next step ?
Please reach out to Gavin to discuss our Fraud Risk Assessment services and training your team.
