Contact Us Login

Collapse of law firm is a reminder for firms to ensure teams are trained to spot and report fraud

Collapse of law firm is a reminder for firms to ensure teams are trained to spot and report fraud

A law firm in Sheffield has made headlines this month amid an ongoing investigation into a suspected sophisticated fraud.

Following the firm’s closure earlier this year, the SRA intervened to investigate the alleged misuse of nearly £40m in client funds.

The firm in question had 25 offices across the country. Such a large‑scale failure demonstrates that even established firms with multiple offices are not immune to internal fraud risks.

The SRA has already paid out £9.31m in compensation claims and anticipates total claims exceeding £21.5m.

This level of disruption shows exactly why it is so important for firms to have robust fraud‑prevention systems to protect client money and maintain trust.

Failure to prevent fraud

The Economic Crime and Corporate Transparency Act 2023 introduced a new “failure to prevent fraud” offence, effective September 2025.

This means large organisations can be prosecuted if a member of staff or an agent commits fraud that benefits the business.

To avoid unlimited fines, companies must be able to demonstrate that they had reasonable measures in place to prevent such wrongdoing.

How can a firm take “reasonable steps” to prevent fraud?

The requirement to take “reasonable steps” can appear ambiguous, as the legislation does not prescribe a definitive list of actions.

However, firms are expected to adopt proportionate, risk‑based measures that reflect the nature, scale, and fraud‑exposure of their operations.

That said, we do suggest the following steps as best practice for preventing fraud.

  1. Lead from the front – The senior management team should be setting the example and making the wider team aware that fraud of any kind is unacceptable. To help get this message across, they should be providing training materials to each employee, no matter their seniority level, but especially where their responsibilities include handling finances.
  2. Conduct a risk assessment – The assessment should cover where and how fraud could occur, who might be involved, what controls are needed to prevent it and what processes you already have in place, as well as identifying where the firm is most vulnerable.
  3. Due diligence – Firms need to apply risk‑based checks on anyone acting for them and on all relevant transactions. This covers partners, agents and any merger or acquisition activity.
  4. Update and share policies – Clearly communicate and embed fraud‑prevention policies across all levels, ensuring staff and associates receive consistent messaging and guidance on expectations, recognising risks and following the correct reporting procedures.
  5. Regularly review prevention methods – Techniques to commit fraud are becoming more and more sophisticated with the advancement of resources like deep fakes, so it’s important to keep on top of these developments as they may require you to adjust how you manage the risks. When there are any cases of fraud or suspected fraud, use them as lessons to learn from next time to reduce the risk of exposure again.

Following these best practices puts you in the best possible position to keep fraudulent activity far away from your firm, saving you from reputational ruin.

Provide your team with the fraud prevention training they need

Our Fraud Prevention and Financial Crime Awareness courses help teams recognise risks, understand common methods and respond correctly when concerns arise, all with the aim of making sure your firm doesn’t become the next target.

Our courses include modules on:

We also offer a variety of other resources to raise awareness, prepared and approved by legal professionals who understand exactly where the weak spots lie.

To find out more about our training platform and keep your firm safe from fraudsters, get in touch for a demo.

 

Recent Posts