Fraudsters are using law firms as cover for bogus investment schemes that have swindled consumers out of at least £100 million over the past 18 months, a legal profession watchdog has warned.
The Solicitors Regulation Authority has alerted the public to be wary of schemes promoted through law firms, with the number of scams having doubled over the past year and a half. Regulators say that they are investigating law firm-linked frauds at a rate of one a month.
The Times reports that many schemes involve money being moved through solicitor client accounts before being transferred to supposedly legitimate financial investors. The authority warned that examples of fraudulent schemes include those purporting to trade in carbon credits, agricultural rights, so-called rare earth minerals and diamonds.
Other bogus products, such as off-plan purchases of holiday homes and leases for individual hotel rooms, have also used solicitors’ practices for cover.
The criminals running the frauds are attracted to using law firm middlemen as it lends their scheme a veneer of legitimacy. Connections with law firms are frequently feature heavily in the promotional material for bogus schemes to make them appear trustworthy and safe.
The SRA points out that genuine financial services companies do not need to have investment funds passed through law firms. It has also warned solicitors against becoming involved in financial schemes because they could unknowingly be laundering the proceeds of fraud.
Paul Philip, the regulator’s chief executive, described the phenomenon as “a growing problem, which can cause real misery for people looking to invest their savings. If you are in any doubt, you should get advice from your own solicitor or other trusted adviser.”
The SRA pointed out that usually law firms were gullible but unwitting participants in the frauds. The authorities have recently fined Lawcomm Solicitors £40,000 after the firm acted for six different companies offering investments in graphene, diamonds, oil contracts and films. Nearly £9.5 million passed through the client account in relation to these investments.
Also, within the past fortnight, Mel Goldberg, of Mel Goldberg Law, was struck off the roll for a range of breaches, including being involved in a suspected investment scam where he took millions of pounds from investors in water purification technology and paid it to other people without the investors' knowledge.
The SRA's statement further needled the solicitors' representative body. According to the Law Gazette, Robert Bourns, president of the Law Society, said the regulator should "reinforce" the message that "the vast majority of solicitors" are not caught in the type of scams described.