International criminals have launched a new fraud offensive on law firms’ client accounts, the Serious Organised Crime Agency (Soca) has warned.

Soca issued a ‘red alert’ to the profession to warn of a trend in ‘advanced fee fraud’ targeting solicitors’ firms.

It said foreign nationals have been approaching British firms for help in a personal injury or other types of claim. Shortly after instruction, these firms received cheques for tens of thousands of pounds, allegedly as out of court settlements.

These cheques were later found to be fraudulent or stolen, with the result that those law firms that had not waited for them to cleared before forwarding money to claimants were defrauded out of thousands of pounds.

Soca advised solicitors to reduce the risk of becoming victims of this fraud by paying close attention to the validity of identification papers when taking on new clients. It also urged solicitors to make suspicious activity reports (SAR) to help prevent further frauds.

Soca added that in addition to the risk of fraud, solicitors were also at risk of exploitation by international criminals and terrorists seeking to launder the proceeds of crime.

It said that all funds received from overseas by cheque for later payment into the UK or overseas accounts posed a money laundering risk. Lawyers were urged to be vigilant and reminded of their obligation to make SARs.

Alison Matthews, chair of the Law Society’s Money Laundering Taskforce, said: ‘Criminals who seek to exploit the services of solicitors to launder money may also seek to defraud those solicitors as well, sometimes for quite significant sums.

'Some criminals may assume that solicitors are less vigilant about money laundering and fraud risks in relation to litigation retainers than they may be in a property retainer, causing them to target firms through this area of practice.

‘We have been advising our members for many years on how to avoid becoming a victim of advanced fee frauds. However, Soca has recently brought to our attention the threat that firms will be targeted in relation to litigation matters.

'We value the dialogue we have with Soca to assist us to provide information to our members in a timely way on new trends in money laundering/fraud.’