Law Practice Management

Is your firm at risk for fraud and embezzlement?

June 13, 2009

IStock_000001197671Small-1 The answer to that question is an unsettling, “Yes.” A recent study conducted by the Association of Certified Fraud Examiners (ACFE) found that increased financial pressures during the economic crisis have led to an overall increase in fraud. The survey also found that “employees pose the greatest fraud thread in the current economy.” And law firms are especially vulnerable. An article in the June 8 issue of the National Law Journal reported that “law firms make easy pickings for embezzlers,” and embezzlement in law firms happens most frequently in solo and small firm practices. Why?

Michael Downey, a partner in the St. Louis office of Chicago-based Hinshaw & Culbertson, whose practice focuses on legal ethics and professional services risk management told the National Law Journal that “attorneys tend to delegate business matters to employees and provide too little oversight.” Does that sound familiar? Moreover, according to Downey, “In small firms, one person often handles accounts payable and receivable. It’s someone whom they rely on for almost everything,” Downey said. Lawyers are more interested in practicing law and too seldom trained to run businesses, he said; they’re eager to hand over financial responsibilities to staff.

According to ACFE President James D. Ratley, “Loyal employees have bills to pay and families to feed. In a good economy, they would never think of committing fraud against their employers. But especially now, organizations must be vigilant during these turbulent times by ensuring proper fraud prevention procedures are in place.”

Does your firm need a fraud prevention checkup? Click here for free fraud prevention tools from the ACFE.

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