Is Your Law Firm Ready for the 2025 Fraud Offence? A Practical Compliance Checklist

Why Law Firms Are at Risk

Law firms operate in a high-trust environment, often handling large sums of client money and confidential information. That makes them an attractive target — and a potential vehicle — for fraudulent activity. Fraud can occur internally through dishonest billing or unauthorised client transactions, or externally through manipulation by third parties posing as legitimate clients or service providers. As gatekeepers to the legal system, law firms must be especially diligent.

Compliance Checklist for Law Firms

1. Conduct a Formal Fraud Risk Assessment

Fraud risks differ by firm. Start by identifying where fraud could realistically occur in your business — from billing practices to client onboarding or third-party relationships. For example, firms dealing with high-net-worth clients or complex cross-border matters may face different risks than those handling routine conveyancing work.

2. Tailor Your Policies to Actual Risk

Generic compliance policies won’t cut it. Make sure your fraud prevention procedures reflect the specific risks you’ve identified — and that they’re proportionate to the size and complexity of your firm. Tailored procedures might include extra checks on high-risk transactions or dual sign-off on client account withdrawals.

3. Get Visible Leadership Support

Senior management must take ownership of fraud prevention. This includes endorsing the policy, allocating budget, and making anti-fraud measures a standing item at leadership meetings. Tone from the top matters — when staff see leadership taking compliance seriously, they’re more likely to follow suit.

4. Strengthen Due Diligence Practices

Make sure you’re carrying out appropriate checks on new clients, suppliers, and hires. Document your conflict checks, KYC (Know Your Customer) processes, and file audits. For example, regular reviews of long-standing client accounts can help spot patterns or inconsistencies that may indicate fraud.

5. Train Staff Regularly

People can’t follow what they don’t understand. Deliver regular, practical training that helps staff spot red flags and know how to respond — not just once at onboarding, but as part of ongoing compliance. Interactive e-learning or short refresher videos work well here.

6. Keep Policies Under Review

Don’t let your procedures gather dust. Review and update them regularly — especially when your firm changes structure, services, or risk profile, or when new guidance is issued. You might also consider an annual compliance review cycle tied to your internal audit programme.

7. Provide Clear Reporting Channels

Staff should know how and where to report concerns safely. Establish confidential, easy-to-access reporting processes and make sure people feel confident using them. Anonymous reporting options and a clear anti-retaliation stance can help increase uptake.

8. Track Training and Policy Engagement

Maintain records of who has completed training, accepted policies, or received updates. This evidence will be crucial if you ever need to demonstrate your compliance efforts to a regulator.

9. Run Internal Audits

Assess how well your anti-fraud policies are working through periodic internal reviews or audits. Adjust processes where weaknesses are found. Consider spot checks, audit trails, and user access reviews to test the robustness of your controls.

10. Assess Third-Party Risks

Don’t overlook external risks. Evaluate the fraud risk posed by third parties such as contractors, outsourced services, and client arrangements — and document your findings. You may need to include contract clauses that set clear anti-fraud expectations.

What Happens If You’re Not Compliant?

Firms that fail to put adequate procedures in place could face criminal prosecution. But even if charges are never brought, the reputational damage alone — especially in a regulated profession — could be severe. Clients want to know their legal advisers have strong ethical standards and robust controls. Falling short could affect future instructions, insurance premiums, and regulatory relationships.

Frequently Asked Questions

Does this apply to small firms?

The offence only applies to “large organisations” — typically firms with over 250 staff or significant turnover/assets. However, best-practice compliance is encouraged for all firms, regardless of size.

What counts as ‘reasonable procedures’?

There’s no one-size-fits-all definition. The government has provided six guiding principles — and what’s “reasonable” depends on your firm’s size, structure, and risk profile. Documentation, training, and risk assessments are key.

What’s the role of training?

Training is one of the most effective ways to prevent fraud. It helps staff understand what to watch for and what to do if they suspect something’s wrong — and it shows regulators that you’ve taken prevention seriously.

Final Thoughts

With the new legislation coming into force soon, now is the time to act. This isn’t just about avoiding prosecution — it’s about protecting your firm’s integrity, clients, and long-term reputation.

Even if your firm doesn’t technically meet the size threshold for the new offence, adopting these practices now sets a strong foundation for compliance and governance going forward.

Want help delivering training or automating compliance tracking? Tayl helps law firms train staff, track engagement, and stay audit-ready — with easy-to-use tools built specifically for regulated businesses.