Internal Controls within a Law Firm

Every now and then, when I get a chance to catch up and read an Accountancy

Web article or check out what’s new and happening on Croner-i’s Accountancy Daily link, and without having to hunt down these topics, I can guarantee one of these publications will feature a story on fraud. For example, an ex-solicitor jailed for stealing more than £340,000 from client funds, a paralegal jailed for stealing £438,000 from a law firm or another solicitor stealing £880,000 from client funds. And I ask myself the question – how is this still happening?

Fraud, from small scale pilfering to million pound scams, continues to plague companies entrusted with critical funds. As a law firm, safeguarding client funds and data is paramount. But how, amidst busy schedules and complex regulations, can you ensure effective oversight?

The good news: It's easier than you think. Implementing simple yet effective internal controls can significantly reduce your risk of fraud and give you peace of mind. Here are some practical steps you can take right now:

1.  Segregate Duties: Don't let one person handle both entering and authorising

payments. This creates a single point of vulnerability. Assign separate individuals for these tasks, and ensure proper authorisation workflows are in place. However, I understand this may be a challenge for small law firms but the next tip can help.

2.  Embrace Technology: Ditch the manual spreadsheets! Utilise software like Adobe Acrobat or DocuSign for electronic authorisations by a practice manager and/or a senior partner at the law firm. Attach proof of bank details using the same software for signatures before sending online payments, adding an extra layer of security.

3.  Secure Sensitive Data: Client information, financial records, and KYC documents are goldmines for fraudsters. Protect them with encryption or password protected zip files. Remember, even casual theft can have serious consequences.

4.  Empower Communication: Implement a company wide policy advising clients to never email fee earners or solicitors about fund transfers without confirming by phone. This simple step can thwart email scams targeting unsuspecting clients.

5.  Cultivate an "Inquisitive Mindset": Don't just sign off blindly. Practice managers and COFAs must actively scrutinise bank reconciliations and payment runs. Look for anomalies, question inconsistencies, and If needed, train accounting staff, COFAs and fee earners to actively scrutinise financial records, questioning anomalies and seeking clarification when needed.

6.  Consider Independent Reviews: Regular independent reviews by external experts can identify weaknesses or inefficiencies and suggest improvements. It's an investment in long term security and peace of mind. Want help with this, email me at info@lawandledger.co.uk.

Remember: Implementing these controls isn't just about ticking boxes. It's about fostering a culture of vigilance and responsibility. By working together and taking proactive steps, we can safeguard our organisations and the trust placed in us.

Start implementing these simple controls today.

For further guidance or assistance, contact me, Lillian at Law & Ledger Consultancy at info@lawandledger.co.uk