A law Office can be surprisingly vulnerable to insider fraud. Yes, professional employees and support staff are highly educated and have sworn oaths to remain ethical and above-board. But promises and actions don’t always coincide. The confidentiality requirements of the law can provide as good a cover for nefarious Employee activities as they do for client confessions.

Unethical law firm employees

Law firm employees are as fallible as any other class of worker, and a busy law office offers myriad ways for a troubled employee to abuse office resources to solve their problems. Often entrusted with access to corporate and customer accounts and documents, these seemingly unimpeachable support staffers perform complex legal tasks behind the mask of client confidentiality, which can also mask their fraudulent behavior.

Why law firm employees steal

Legal employees steal for the same reason any other employee steals: because they can. The Association of Certified Fraud Examiners (ACFE) has determined that employee theft is the consequence of a triangle of factors: financial need, opportunity, and rationalization.

Financial need or pressure: Thieving staff persons often have a private financial crisis that they are unable to solve with their legitimate income. Secret gambling or shopping compulsions, poor financial decision-making or other concerns outside the office can overwhelm their judgment and drive them to take irrational steps to alleviate the discomfort.

Opportunity: As previously noted, law offices are filled with personal and financial data about dozens of clients, co-workers, and employers. The concept of attorney-client privilege can cast a halo of propriety over an office that prevents anyone from considering the staff capable of committing an illegal act.

Rationalization: The majority of employees who steal from their employers have never committed a criminal act, and they often don’t consider what they’re doing to be a crime. They justify their action as a reasonable response to an untenable situation, or cloak it as a “loan,” a recovery of unpaid expenses or wages, or even as a means to “correct” damage caused by the employer to another person.

These white-collar criminals don’t present like the stereotypical criminal, either. They are usually older and well-educated. Many regularly attend religious services, which makes them extremely difficult to identify.

How law firm employees steal

Most legal assistants bill for the time they spend on client accounts with little or no oversight by the associated attorney. Padding that bill with hours for work not completed is stealing from the client. Employees also have been known to take the customer’s bank or personal information, or skim from the client’s trust account for personal gain.

There also are many ways a worker can steal from the firm itself. Some of the more common examples include:

• Submitting payroll claims for unworked hours or expenses.
• Using company accounts for personal expenses, such as adding personal items to a corporate order or using a company card to purchase items for home.
• Generating fake vendor accounts, with themselves as the vendor. Their “vendor company” submits false invoices, and the employee pays the invoice with company money.
• Helping themselves to company supplies like paper, office equipment, paper towels, or expensive printer toner.

Detecting law firm employee fraud

Some law offices are more susceptible to fraud due to the type of law they practice. Real estate firms or personal injury offices, which may routinely hold large amounts of liquid financial assets, are at risk without proper vigilance over security procedures.

While it is extremely difficult to catch a fraud in process, there are certain behaviors that can signal a potential problem employee. Routinely working late or on weekends when it’s not expected could be an attempt to be alone in the office. Requesting information unrelated to a person’s job might suggest nefarious motives. And making a purchase that would appear to be beyond an employee’s income could be a sign of ill-gotten gains.

Because of the complexity of the work and the unique susceptibility of law offices to employee fraud, many law firms prefer to use digital tools to provide in-depth, ongoing fraud avoidance services.

DFND Analytics has more than 30 standard and proprietary forensic accounting algorithms that can be run against financial data to search for anomalies, irregular activity, and suspicious transactions. Using a law firm’s own accounting software, DFND can track firm data, as well as vendor and customer lists to perform its forensic accounting tests. Reviews can occur as often as six times a year, ensuring that company finances are secure regardless of staff turnover or other organizational disruptions.  As an added measure of protection, a DFND financial professional examines each report before it is sent to clients.

Your law firm has earned respect in your community because of your excellent work and high ethical standards, and those assets deserve protection from the harm caused by employee theft. Fortunately, today’s analytical digital tools can safely and confidentially provide that protection.

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