SRA to help firms embed mortgage fraud risk systems The SRA has set out how it intends to engage with firms undertaking conveyancing work in order to reduce the risk of mortgage fraud.
Over the years, conveyancing has accounted for a high proportion of claims on both solicitors' insurance and the Compensation Fund, as well being the subject of an unacceptable volume of complaints against the profession. While some claims arise from poor quality work, most are a result of weak risk management and compliance systems within the practice resulting in a failure to detect fraudulent activities or other dishonesty on the part of third parties or, indeed, within firms themselves.
In the last three years the SRA has focused on the risks posed by a small number of individuals and firms involved in property-related fraud and money laundering. As a part of this process we have engaged with the insurance industry and, as a result, have decided to undertake further work to help firms address any lack of robust risk management systems within firms carrying out conveyancing work.
The SRA is, therefore, re-visiting its draft Conveyancing Strategy to ensure it provides appropriate support to solicitors. This starts with a comprehensive review of current practices, which will run until the end of 2013.
Richard Collins, SRA Executive Director for Policy, said: "As a risk-based regulator we continually analyse the key risks posed to the achievement of our regulatory objectives. It is clear that we need to continue to target resources on conveyancing – both to assist firms in managing their own risks and compliance and to identify and prevent dishonest behaviour; either by third parties seeking to use solicitors’ firms for fraudulent transactions or by a small proportion of firms themselves.
“As a public interest regulator we need to ensure firms take seriously the risks in this area and establish good compliance and risk management systems so as to demonstrate an effective degree of internal control. In order to help firms do this, we are undertaking a review that will give us a better information on the risks they face when conducting conveyancing work to ensure that the transaction they're dealing with is genuine and above-board. We will aim to identify best practice to guard against risks and reduce the number of firms and clients who fall victim to such scams."
The SRA's main focus will be on areas which can lead to financial loss, such as the holding of client money and the use of undertakings. One area under consideration, for example, is whether it would be possible to amend elements of the underlying conveyancing process in order to reduce the extent to which firms need to hold client money, enhancing the safety of client funds and protecting the profession against criminal elements.
The review will see the SRA work with partners such as the Law Society, the Council of Mortgage Lenders and the Land Registry, and will also compare its approach against that of other UK regulators and international practices. Visits to 100 firms to look at the risks they face during conveyancing work as part of the draft Supervision and Enforcement Strategy for Conveyancing have been completed and the feedback is currently being analysed.
Find out more about the draft Supervision and Enforcement Strategy for Conveyancing