6 min read

In our previous article, we outlined five common types of fraud in the legal funding industry. Now, we’re introducing some practical tools and strategies to help you detect and prevent fraud before it impacts your business.

There’s no one-size-fits-all solution to stop fraudsters, but with critical thinking, caution, and a bit of effort, you can significantly reduce the risk of falling victim to fraudulent activity. Here are six of the most effective tools and methods you can incorporate into your process to protect yourself from legal funding fraud.

1. Attorney Bar Websites

Attorneys are often key players in your success. Whether they originate cases or serve as partners in claims you’ve funded, it’s essential to ensure they’re reputable. Checking their bar status is a simple but important step.

Start by visiting the relevant state bar website to verify the attorney’s standing. For instance, New York State’s attorney search allows you to quickly look up an attorney’s current status and any disciplinary history. Keep in mind that even if an attorney appears to be in “Good Standing,” they might have faced issues in the past or have unresolved disciplinary cases.

Even if you’ve known an attorney for years, it’s wise to check their status periodically. Issues can arise, and it’s better to stay informed than be caught off guard.

2. Bankruptcy Checks – PACER & CourtLink

Another crucial step is checking for any bankruptcy history, particularly for plaintiffs—and sometimes attorneys—when necessary. Bankruptcy can signal financial instability or even past fraud cases. If a plaintiff is involved in bankruptcy, it can affect your investment if the case is tied to previous proceedings.

You can search for bankruptcy filings through PACER, a tool that provides access to legal case records from U.S. district, bankruptcy, and appellate courts. Alternatively, LexisNexis CourtLink offers a comprehensive database for checking court dockets.

3. Background Checks – Transunion TLOxp

For a more thorough background check, Transunion TLOxp can deliver detailed profiles on individuals or businesses within seconds. This tool pulls from billions of public and proprietary records, offering insights into criminal history, civil records, assets, and more.

Implementing background checks at key stages—such as before approving funding over a certain amount—can help you avoid working with risky clients or attorneys. In some cases, these checks may also assist in collections when an attorney’s record seems unreliable.

4. Simple Yet Effective: Google Searches

Sometimes, the simplest solutions are the most effective. A basic Google search can reveal a wealth of information about plaintiffs and attorneys. Relevant news articles, court cases, or social media posts can provide early warning signs of fraudulent behavior.

Sample search queries:

• “Plaintiff name fraud”
• “Plaintiff name lawsuit”
• “Attorney name sanctions”
• “Attorney name history”

This type of preliminary research should be part of every funding process. It’s quick, free, and can easily uncover red flags that warrant further investigation.

5. Building a Story

Each tool you use contributes to the bigger picture: building a complete story of the plaintiff and attorney. By collecting information like government-issued I.D.s and searching relevant databases, you can start piecing together a coherent and consistent narrative.

Your goal is to identify discrepancies early on. For example, do the case documents and accident reports align with online search results? Are there any inconsistencies in the plaintiff’s claims or the attorney’s history? Catching these signs early can prevent you from being caught in a fraudulent claim.

6. Ongoing Monitoring and Audits

Fraud prevention doesn’t stop at the initial funding decision. Ongoing monitoring and regular audits of your funding process are essential. By continuously assessing the information you gather, you can stay ahead of fraudsters who might try to take advantage of your business.

Conclusion

While most people are honest, fraud remains a persistent issue in the legal funding industry. By using these tools and strategies, you can safeguard your business from fraudulent activity and reduce the risks that harm both the industry and your bottom line.

With just a little extra scrutiny, you can uncover enough information to discredit a claim or catch a client or attorney in a lie. The next step? Audit your current process and determine where these tools can be integrated to better protect your business.