Fraud Prevention: The Power of Open Banking for Law Firms

What is Open Banking?

Open Banking allows customers to safely and securely make payments and share banking data (account information and transaction history) directly from their banking provider, using Application Programming Interfaces (APIs) that are tied directly into the systems of the customer's bank.

It uses the same technology as Online or Mobile Banking apps, so it's just as safe. When completing an Open Banking transaction no one gains access to the customer's bank login details or passwords. Login details are entered directly into the bank's own systems and the bank simply confirms who they are before enabling them to go ahead and authorise the Open Banking transaction.

Fraud Risks for Law Firms

In recent years, the finance industry has witnessed a significant increase in fraudulent activities, especially when it comes to Authorised Push Payment (APP) fraud - when a criminal tricks someone into sending money directly from their bank account to an account which the criminal controls.

UK Finance recorded almost 200,000 incidents of APP fraud last year, with losses totalling £583.2 million. Law Firms have been an obvious target for fraudsters, with large sums of money often being moved upon completion of certain types of transactions.

Conveyancing matters are seen as a particularly lucrative target for fraudsters, due to the time pressures to complete a property transaction on a given day. This has led to multiple incidents of Friday Afternoon Fraud occurring.

Whilst these are often the stories that hit the headlines, the SRA noted in its risk outlook report that criminals are broadening their attacks to other fields as well, whilst the Law Society has highlighted that legal practices arguably have a duty to protect their clients – who may not know about such scams.

Benefits of Open Banking for Law Firms

Open Banking has been a game changer for competition within the financial sector, enabling customers to safely and securely share their banking data with third parties who can then provide more personalized services. But what about the legal industry?

It can provide law firms with easier access to financial data and real-time insights into their clients' finances, allowing them to have greater insight when undertaking due diligence and other common tasks such as source of funds checks.

Additionally, Open Banking can make the payment process smoother and more efficient for both the law firm and their clients, as well as provide a secure way of sharing and obtaining the bank account information needed to initiate payments in the first place.

Open Banking can help mitigate the risk of payment fraud, by removing the need for law firms and their clients to share bank account information by email, post or phone. This helps combat the risk of Email Modification Fraud - identified as a key threat to client money by the SRA.

Incorporating Open Banking into their practices can help law firms provide better service, a greater level of protection for their client's funds, and ultimately enhance client satisfaction.

Using Open Banking to Request Payments

With remote legal transactions becoming more common, it's increasingly important for law firms to have secure and efficient methods of capturing payments remotely. This is where Open Banking comes in.

By enabling payments to be initiated directly between a customer's bank account and the law firm's account, without the need to key in bank account information manually, the payment is guaranteed to go to the correct bank account.

Open Banking makes it easier for customers to make payments directly from their bank accounts. This eliminates the need for third-party payment processors and provides a seamless payment experience for both the law firm and the customer.

By taking advantage of Open Banking, businesses can streamline their payment processes and stay ahead of the competition.

Using Open Banking to Request Bank Account Information

Through Open Banking services, law firms can obtain verified bank account details from their clients which are supplied directly from the client’s bank.

By doing so firms can ensure that the client has access to the account they are providing information for, and the firm can check that the name on the account matches the name of the client (or clients).

This gives law firms confidence that they have the correct bank details on file for their clients, and enables them to easily make payments back to them. This, in turn, mitigates the risk of payments going to the wrong account through either human error or fraud and also helps firms to comply with regulators' aged and residual balances rules and guidance.

Tips for Implementing Open Banking Solutions in Your Firm

Open Banking solutions are becoming increasingly popular among firms and for good reason. They can help law firms provide better service, a greater level of protection for their client's funds, and ultimately enhance client satisfaction.

When deciding to use Open Banking technology in your company, it is important to have a clear understanding of your company's goals and objectives. You should also understand how this technology will fit in with your existing business processes and strengthen them. This will ensure that the Open Banking solution you select aligns with your business strategy and meets the needs of your company.

With these tips in mind, you'll be well on your way to successfully implementing an Open Banking solution within your firm.

Open Banking for Law Firms with Safe Capital

It is increasingly important for law firms to become familiar with Open Banking and its numerous benefits. By utilising Open Banking, law firms can ensure that their client’s funds and data remain secure while being able to access the data they need quickly and easily.

Not only does it protect against fraud risk, but it ensures an efficient and transparent payment process. Furthermore, by using Open Banking solutions to share bank account information, law firms can benefit from a safer system of information sharing than ever before.

Safe Capital enables law firms to obtain client bank account information and receive clients' funds safely, securely and quickly using Open Banking. We can help law firms make big gains in security, confidence, and client trust—all essential components of running a successful legal practice.

Get in touch today to find out more about how we can help protect your business from fraud, support you in meeting your regulator's rules and guidance, as well as increase operational efficiency.