Regulator reveals complaint hotspots and top risks for lawyers

One such area of concern is in motor vehicle accident claims and the practice known as “carnapping”, in which business representatives who offer services – such as towing or car hire – have a person sign certain documents, including an “authority to act” form.

Consumers who have complained to VLSB+C reported that these documents were not explained to them and that the lawyer did not follow up to make sure they understood the effect of the authority.

The VLSB+C has also identified “particular concern” in lawyers who have engaged in claim farming, which is the act of collecting information about individuals who have suffered personal injuries and making unsolicited contact to encourage them to make a redress application.

While legislated in South Australia, NSW, and Queensland, Victoria has not yet taken that step. However, the VLSB+C said it was “alert to the risk” and involvement of the state’s lawyers.

The third risk area is in mortgage financing, where the VLSB+C has identified law practices that appear to be offering these services in breach of their professional duties and legislative obligations.

Any lawyer who has helped to facilitate a loan, or who has received or dealt with payments for the purposes of a loan, may be involved in this practice, the VLSB+C explained in its Risk Outlook.

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Reflecting on her own career, commissioner and board CEO Fiona McLeay said she has witnessed “many structural changes in the profession and an increasingly complex working environment”.

“Lawyers have been adaptable when it comes to responding to these developments. After all, dealing with legal and social changes and technological advancements in legal service delivery are consistent elements of practising law, rather than being exceptions to the norm.

“Even so, the pace of change in the past five years has been extraordinary, and I appreciate the pressures the profession is experiencing – all while managing business profitability and guiding a new generation of talent,” McLeay said in her opening message.

One of those changes has been the advent of artificial intelligence, with the VLSB+C’s Legal Services Research Centre finding almost 40 per cent of Victorian lawyers have been using generative AI tools.

While they have created opportunities for innovation and efficiencies in the delivery of legal services, the VLSB+C said it was important that lawyers not rely on these outputs without personally verifying them or generating outputs that cannot be properly verified.

“Doing so is a breach of professional obligations, puts their clients in financial and legal jeopardy and compromises the profession’s reputation. Lawyers who use inaccurate or misleading outputs in court materials and submissions also risk judicial criticism,” it said.

The VLSB+C said it would take failures by lawyers to properly verify materials generated with AI to be “extremely serious”, particularly if it leads to poor outcomes for consumers or creates administrative burdens and inefficiencies for courtrooms and their judicial officers.

Another change has been 2026’s new anti-money laundering and counter-terrorism financing (AML/CTF) obligations, which have been expanded to cover lawyers who provide services that have been particularly vulnerable to being exploited by criminals.

The regulator said it was important that lawyers understand the risk indicators and red flags for money laundering and terrorism financing.

Lawyers should also regularly review their cyber security measures and train staff to ensure their practice does not fall victim to an attack.

VLSB+C said it has seen cyber security breaches that “could have been avoided if cyber security controls had been implemented and strictly adhered to”, including appropriately verifying payment details, avoiding email compromises, and not disclosing verification codes.

“Law practices should regularly review their cyber security measures and promptly address any identified weaknesses, including through system updates,” VLSB+C said.

“Failure to do so may have serious consequences if consumer harm occurs – including regulatory and disciplinary action – as well as reputational implications for the law practice itself.”

The VLSB+C also identified supervision failures, including a failure to oversee the activities of employee lawyers, lawyers identifying themselves as “legal director” but relinquishing effective control and responsibility to non-legal directors, and failure to properly oversee the activities of other principals in the law practice.

These failures create “serious risks”, such as the exposure of clients to serious harm caused by incompetent or unethical legal advice.

“Failure by the principal to fully understand what legal work is being done, and for whom, also heightens the risk that a law practice will be used by employees of the practice to facilitate fraudulent activity,” the VLSB+C said.

Inadequate supervision of junior lawyers can also lead to “poorly trained professionals transitioning to unsupervised practice”.

“Not only can this undermine their health and wellbeing, it can also result in poor outcomes for clients, impost on the court system, damage to a law practice’s reputation and unforeseen future costs, and a strain on the broader justice system,” the regulator said.

The VLSB+C has identified other risks and provided advice on how to navigate them in the Risk Outlook 2026.