Previously we discussed the challenge that fraud poses to legal services. We outlined the different types of fraud and how each was testing an industry that needs trust to be placed in its practitioners. It’s fair to say that the erosion of that trust could threaten the entire legal industry. One type of fraud we highlighted was that of identity fraud, which is on the rise in the UK. It is also a problem that is prevalent in legal services. What’s more, as authorities try to keep pace with the methods being used to steal, manipulate and abuse people’s identities, fraudsters are developing ever more sophisticated systems to defraud their victims.
How worried should we be? And how can society and, specifically, legal services prevent identity fraud happening to their firms?
Identity fraud is an online and offline problem
Identity fraud is inextricably linked to identity theft, which is when a criminal steals a person’s information or possessions so that they can use their victim’s identity for some form of gain. Identity fraud is when a criminal uses a stolen identity for financial gain.
In 2020, with so much more of our lives taking place online, our identities are under threat like never before. For example, the rise of online shopping – with 2.1bn people worldwide set to shop via the internet by 2021 – means we are all sharing personal information online to purchase goods. Phishing can also steal sensitive information via email.
Criminals are also still attempting to steal identities using offline methods, such as common theft, card skimming, cold calling (vishing) or impersonating a corporate identity or even the identity of the deceased. There is a range of routes that an identity fraudster can use, and has led to more than 190,000 cases of identity fraud in the UK in 2018 – making us all vulnerable.
Identity fraud in legal services
Legal firms are specifically being targeted by identity fraudsters due to the large flows of capital that circulate throughout the industry. With clients completing corporate transactions, purchasing real estate or simply paying fees, the prize for fraudsters is obvious. Vigilance is vital and the need to adequately verify the identities of parties in a transaction is more important than ever.
Of course, verifying the identity of clients is not new for legal firms. It has been a part of everyday life for solicitors undertaking “relevant business” as defined in the Money Laundering Regulations 2003. However, technological advances have given fraudsters the tools they need to imitate their victims with worrying accuracy and professionalism.
Completing thorough due diligence and client verification/KYC checks is a cost and time drain for legal services. In a competitive industry like law, it can be a corner that gets cut. Fortunately, technology can help firms to securely check identities without eroding budgets and workdays.
How technology can help prevent identity fraud
Here are 3 steps legal firms can take to minimise the risk posed to them and their clients.
- Online identity services
In recent years, we’ve witnessed the emergence of ‘identity verification as a service’. By outsourcing this process, legal firms can expedite client onboarding with increased security. Identity verification specialists have the technological knowhow, regulatory awareness and operational scale to make verification fast, seamless and secure. This allows law firms to focus on their core offerings rather than spending time on the complexities of verification. Onfido is a leading player in this field, with the likes of Google and Deliveroo using their service to securely verify customer and partner identity.
- Document management systems
As well as using a third party to verify identities to prevent fraud, firms can leverage service providers to help with document management. Services like Docusign and Juro provide secure portals where firms can send documents, log who is reading them and see when they have been signed. The security features on these services are extremely impressive and bespoke, meaning that the chance of fraudsters imitating signees or intercepting documents is reduced.
- Use a secure payments provider
Secure payment solutions such as Shieldpay reduce the risk associated with sending and receiving sizable funds. As the industry leaders in Third-Party Managed-Accounts (TPMA) technology, Shieldpay’s secure payment technology offers law firms a solution that keeps clients and their funds protected from fraud.
Identity fraud prevention, technology and focus
Every law firm should be seeking to outsource the elements of their business that sit outside of their core offering. When it comes to defending against identity fraud, it pays to use providers who specialise in providing the technology that keeps fraudsters at bay.
A legal firm should ask one simple question: does this third party and their technology help my lawyers to do their jobs? If a firm can use a piece of technology that frees up lawyers to focus on servicing their client needs, it should be added to their armoury in the fight against identity fraud.
As we have seen from the rising cost of fraud (both financial and reputational), and with the sophistication of criminal activity increasing, legal services must be prepared to use services that are in line with or ahead of that level of technological sophistication. This is the best route keeping lawyers and their clients safe from identity fraud.
To find out how Shieldpay is helping the legal industry with prevention against fraud, book a meeting with a Shieldpay expert.