Legal & Accounting

Protect Against Client Fraud

Law Firms & Due Diligence

"It takes many good deeds to build a good reputation, and only one bad one to lose it."

Benjamin Franklin

Law Firm clients must be properly vetted to avoid dealing with an illicit group or individual. Any negative press surrounding a client violating AML regulations would forever show up in internet searches related to the Law firm, which would damage new and existing client relations

Should a fraudster hijack a client account or pose as a new client to siphon off funds from the sale of a business, property or estate, the law firm may itself violate multiple laws, ranging from wire fraud and negligence through to KYC.

Although “Gatekeepers” (such as Lawyers and Accountants) are not currently subject to AML regulations, several new USA Bills (the “Corporate Transparency Act” and the “Illicit Cash Act”) are currently under review. If enacted into law, these would oblige Law Firms to carry out AML reviews, similar to the Customer Due Diligence (CDD) and Customer Identification Programs (CIP) required of financial institutions.

Accounting & Audit

If a client onboards with a fake or stolen ID, there is a greater chance that Financial Statements also have material misstatements of figures and/or controls.

Regulations by the FRC, IAASB and PCAOB include "material misstatements due to fraud or error". This requires auditors to assess fraud risk, maintain professional scepticism and not overly rely on client statements.

With new or higher-risk clients, the starting point of onboarding should be identifying key decision-makers and those with the ability and authority to make fraudulent adjustments to financial statements.

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