It has been reported this week that a senior cashier in a Lancashire law firm has been barred from the legal profession after being found to have misappropriated more than £150,000 in client and office money.

The individual was found guilty in December 2013 of having misappropriated £157,975.67 between 2009 and 2013. He was sentenced to two years in prison by Preston Crown Court in February 2014.

Not unsurprisingly, the Solicitors Regulation Authority has now taken the decision that it is ‘undesirable’ for the individual to work in the legal profession and he may not be employed in any solicitor’s practice or by any solicitor without SRA permission in future.

It has been reported that he was a ’well-trusted’ member of the team before he started misappropriating funds and that funds were misappropriated using ’well-disguised accounting entries’.

The case highlights that even in situations where you would expect there to be a certain amount of “checks and balances” in place, a fraud can be carried out undetected over a long period of time.

This also highlights that policies for handling cash and money are essential in order to deal with the potential fraud risk a business may face and any business should ensure that they have effective cash/money control measures in place such as:

  • Establishment of responsibility – Ensure that only designated personnel are authorised to handle cash/money receipts.
  • Segregation of duties – Ensure that different individuals receive cash/money and record cash/money receipts.
  • Documentation procedures – Ensure that remittance advice receipts and deposit slips are used.
  • Independent internal verification – Have other employees or supervisors count cash/money receipts daily or carry out the verification process;
  • Have a reconciliation procedure – Ensure that a system is in place for reconciling bank statements and other internal records with cash/money received on a regular and ad hoc basis. Make sure that a system is in place for resolving differences so that these are brought to the attention of the appropriate level of management within a business. In reconciling the bank account, it is customary to reconcile the balance per books and balance per bank to their true cash balances. To obtain the maximum benefit from the bank reconciliation, the reconciliation should be undertaken by an employee who has no other responsibilities related to cash.
  • Verification – Have records periodically verified by an independent employee on a surprise basis.
  • Discrepancies – Make sure that they are reported to management.
  • Rotation of duties – Ensure that employees’ duties are rotated and that holidays are taken.
  • Identification – Have an adequate system in place to identify which employees were handling cash at a particular time.

The case of the trusted legal cashier using ’well-disguised accounting entries’ to hide his fraud over a number of years has a familiar ring to it and recent cases handled by the Civil Fraud Asset Recovery Unit have seen substantial sums of cash misappropriated by employees, especially where the fraud has been perpetrated over a number of years. Businesses that address the above issues, as part of their overall fraud prevention strategy, will maximise their prospects not only of detecting but also deterring cash/money fraud in the workplace.

If you have any questions or wish to discuss any issues raised in this blog please contact Simon Lockley.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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