Wet signatures protect against fraud and abuse

The full digitalisation of drafting, executing and registering Lasting Powers of Attorney (LPAs) has the potential to encourage fraud, financial abuse and a general lack of understanding of the purpose and scope of these important documents.

At the moment a physical wet signature is required for the LPA to be valid but under FCA proposals this would no longer be needed to complete the document. Such a step is designed to make the process easier and to encourage take up but has drawn much concern from the legal community.

LPAs, which can cover both financial affairs and health decisions, are crucial documents to enable chosen third parties to assist individuals in the managing of their affairs if they are unable to do so themselves.

While their use is overseen by the Office of Public Guardian, where any suspected abuse can be reported to, they are not documents to be drafted and registered without proper due care and attention. For instance an unlimited financial affairs LPA allows named attorneys to step in and manage bank accounts, sell property, trade stocks and shares.

This provides a wide mandate with wide powers which in turn provides significant opportunity for attorneys to commit fraud or financial abuse. In fact, former Court of Protection Judge Denzil Lush, in the Gazette, warned of the use of LPAs and the lack of safeguards in the system as opposed to the more thorough Court of Protection appointment of deputies.

While Denzil Lush’s warning may have gone slightly too far, it is important to heed his concern. If such important documents are made easier to produce without the need for professional advice or even a signature of the donor, then the role of attorney is likely to attract some bad apples who will take full advantage. In turn the lack of regular monitoring from the Office of Public Guardian, as opposed to yearly reviews carried out on deputies by the Court of Protection, could lead to severe financial abuse of inherently vulnerable individuals.

Even more of a concern than financial abuse, which is likely only to happen in a handful of cases, is the fact that the easier it is to complete a document, the more likely the donor and the attorneys do not fully understand how it works. This could lead to mistakes, however innocent, that place all parties into a difficult position. It is not enough just to look after the best interests of the donor when attorneys use the document. They must be aware of all key principles and how they need to work with the donor when making decisions, until there is medical evidence that states he/she has no capacity.

Therefore, in danger of sounding like a Luddite, we must be aware of technological advancement. Yes, let’s make it as easy as possible but there needs to be checks and balances in place to mitigate against misuse. The actual requirement for a signature adds a definite hurdle to overcome for any potential fraudster, as the donor will be (hopefully) check the document before signing. Also individuals with sizeable estates or complicated family set ups should always seek professional advice and consider how LPAs can be drafted to best manage their assets and to restrict incorrect use.

 James Ward is partner and head of Private Client at Seddons.