One of our solicitor members has reported being the subject of a scam, involving a road traffic accident referral arrangement.
The solicitor was approached by a prospective referrer who, although based in England, claimed to have contacts with garages in Scotland. The ‘referrer’ displayed in-depth knowledge of personal injury terminology and the local industry, being able to refer to other PI firms and solicitors.
An informal agreement was reached whereby a referrer fee would be paid once the client’s identity had been confirmed, statement taken and vetted, third party vehicle details obtained and terms of business signed.
Due diligence was carried out on each file, good quality statements were taken and ID, proof of address and signed terms of business were obtained. Clients credibly described the details of the accidents in emails and telephone calls with the firm.
Issues began to arise after the solicitor intimated the claims to the third party insurers who had no records of accidents, identified mismatches with the policy holder names and could prove in some cases that drivers were not in the stated locations at the time. A letter to one claimant’s address provided evidence that he had not made a claim and his identify was being misused.
All claims management companies (CMC) in Scotland must have registered their activity with the the Financial Conduct Authority (FCA) by 31 March 2019. As such, anyone wishing to check if a company is a registered CMC, can do so directly on the Ministry of Justice website. All registered CMCs will be required to comply with FCA rules as of 1 April 2019. You can find further information about this on the FCA website.
After that date we would only recommend engaging with a referrer who is registered and regulated by the FCA and therefore required to follow their compliance code.
Solicitors are encouraged to carry out due diligence on referral businesses in advance of entering into arrangements with them. This should usefully include checking the status of any incorporated referrals businesses on the Companies House website.
Our experience suggests that higher risk referral businesses will show red flags on this website such as the failure to submit accounts timeously and potentially facing strike off from the register. It would also be beneficial for solicitors to perform due diligence on the business history of the key people at the referral business.
You can find specific guidance on how to identify and verify your client if they cannot attend your office in our AML FAQs.
If you suspect a fraud, or other internet crime, remember to report it on the Action Fraud website.
Where a fraud or scam has actually taken place, it should be reported directly to Police Scotland.