Keep Your Guard Up: Bad Cheque Scams Targeting Lawyers Are Getting More Sophisticated

Just over two months ago I did posts on SLAW and AvoidAClaim that warned family law lawyers to be aware of bad cheque scams on matters involving the collection of outstanding spousal support. [See either of the earlier posts for the actual text of one of these messages.]

Family lawyers continue to be the targets of fraud attempts – even more so than two months ago. On an almost daily basis I am getting at 2-3 calls and emails from Ontario lawyers who have been approached to act on matters that are clearly frauds. On some occasions it appears dozens or even hundreds of lawyers are targeted with a single email blast.

Lawyers in other practice areas must remain vigilant as well. We continue to see attempted frauds involving debt collections, and we also continue to see real estate frauds as well (more ID theft now, as flip frauds are harder in a slower market when property values are not rising).

My practice management advisor colleagues in other provinces and states are telling me that they are also seeing large numbers of attempted bad cheque frauds – and some successful ones too. While I am sure bad cheque frauds are just a prevalent in the U.S., the problem is hidden as in any given state lawyers are insured by many different insurers, and some have no insurance at all. Good to see that the U.S. legal trades have finally picked up on this:

• An ABA Journal article on $500,000 in successful email frauds in Hawaii
• An ALPS newsletter on the million dollar plus frauds they are seeing

I hope increased awareness by lawyers of the frauds that are targeting them will help some avoid being victimized.

To keep lawyers informed of how frauds targeting them are evolving, I wrote this post to highlight some aspects of recent frauds we have seen.

• In Ontario we have seen three instances where fraudsters have forged multiple cheques written on law firm trust accounts (either from scratch or on cheque stock). While we are not familiar with all the circumstances in which these various cheques were tendered, one has to presume that the fraudsters intended to benefit from the fact that a cheque written on a law firm account would receive less scrutiny than one coming from an unknown entity. In one case, several counterfeit cheques were created in an apparent attempt to take funds from the general account of a law firm’s holding company.
• I have seen several attempts at frauds in the last few months where the amount involved was lower, and thus appeared to be more reasonable and real. For example, $150,000 on a spousal collection matter looks more reasonable or typical as compared to $850,000.
• I am also seeing frauds where the fraudster is making efforts to appear to come from a trusted referral source. For example, the fraudster is contacting a real estate agent and asking for the name of several lawyers in a particular community and when the initial call or email comes in the reference source is highlighted. My friend Jim Calloway saw an example of this in Oklahoma just last week.

Sorry to sound like a broken record on this, but keep your guard up and follow these steps to avoid being duped:

• Make sure you are familiar with the common types of bad cheque frauds that target lawyers, and the red flags that can help you spot the fraudulent matters.
• Educate your staff on common types of bad cheque frauds their associated red flags. Law firm staff can sometimes be in a better position to spot fraudulent matters. We have seen cases where junior lawyers, support staff or law office accounting staff have prevented frauds because they spotted red flags that the lawyer did not see.
• Religiously follow the client identification and verification steps required by the know-your-client rules.
• Carefully review the details of any matter you are handling to make sure it is a legitimate one. If things don’t add up, ask more questions and dig deeper.
• Be cautious and check the validity certified cheques or bank drafts deposited into your trust account. Ideally, try to have funds deposited in your account by a wire through the LVTS system.
• Cross-check bank and payor information (spelling of name, address, account and transit numbers, phone numbers) on independent sources (e.g., a bank or payor website).
• Never be in a rush to disburse funds from your trust account – especially if your client is really pushing to get the funds quickly.
• Always remember, if it looks too good to be true, it probably is.

Use the free fraud prevention resources on the practicePRO Fraud Page (www.practicepro.ca/fraud) to help the lawyers and staff in your firm avoid being duped. In particular, these resources will help you and your staff avoid being duped:

• Download our Fraud Fact Sheet and give it to the lawyers and staff in your office. It lists the common types of bad cheque and real estate frauds and the red flags that will help you spot a fraudulent matter.
• Listen to the archived LAWPRO webinar presentation on what frauds look like and how to avoid them. Access the MP3 (audio) file and the program PowerPoint and materials.

Lastly, call your insurer if you suspect you have completed or are acting on a matter that appears as if it might be a fraud. Claims staff can talk you through the common fraud scenarios they are seeing to help you spot red flags and ask the appropriate questions of your client to determine if the matter is legitimate. And, if you have been duped, they can help you take appropriate steps to respond and deal the matter.

Cross-posted on AvoidAClaim.com