The following is the text of a Fraud Alert sent by LAWPRO to Ontario lawyers on June 29, 2010. Due to the response we received from our previous alert on June 17 we felt it was important to make lawyers aware of new details we've learned about this scam.

Last week’s fraud warning e-blast on the collaborative family law agreement fraud prompted dozens of calls and emails to LAWPRO. At least 30 Ontario lawyers indicated they had been recently targeted or were in the middle of dealing with a matter involving this exact fraud. These calls and emails have helped up us better understand how this fraud works, and how the fraudsters are taking steps to appear ever more convincing and legitimate.

With this follow-up e-blast, we are sharing this information to help you avoid being duped. It is critical that all lawyers be alert to this and similar bad cheque frauds. Lawyers in Ontario and several other provinces are being targeted on a daily basis.

The essence of these bad cheque frauds is an otherwise legitimate-looking client file that creates circumstances that trick you into quickly disbursing funds from your trust account. The following points will help you appreciate that you must be wary of some of the circumstances that might otherwise make a fraud appear to be a legitimate client matter:

• Don’t be fooled by e-mails personally addressed to you: Some of the initial contact messages we have seen are personalized with the lawyer’s first and last names appearing at the start of the body of the message. (See this post on the Avoid A Claim blog for an example of an initial contact message.)
• Don’t be fooled by a follow-up to the initial contact message: Many lawyers who ignored the initial contact message received an email follow-up message asking if they received the initial contact message. See below for an example of one of these follow-up messages.
• Don’t let you guard down because it is a referral from another Ontario lawyer: Two Ontario lawyers that don’t practice family law indicated that they forwarded the initial contact message to lawyers they knew practised family law.
• Don’t be fooled by a referral from a foreign lawyer: In two instances the initial email was drafted to appear that it was coming as a referral from a UK lawyer.
• Don’t be fooled by a British or European name: In earlier versions of this fraud the clients had an Asian name. In most of the more recent attempts the client has a British or European name.
• Don’t be fooled by legitimate looking identification: The fraudsters are providing identification without hesitation. We have seen colour scans of the identification pages of a Chinese passport and US driver's licences from various states including Michigan, Illinois, and Alabama.
• Don’t be fooled by a “collaborative family law agreement”: We have seen seven different versions of the same collaborative agreement. See one version of it here. The only differences are the amounts owing and the names of the client, the ex-spouse and their respective lawyers.
• Don’t be fooled by detailed background information: We have encouraged lawyers to ask for further background information when there are suspicions as to whether the matter is a fraud. This remains one of the best ways to determine if the matter is a legitimate one. However, the information provided by the client must be carefully reviewed for reasonableness and consistency as the replies to requests for further information are becoming more detailed and convincing. They now include information that ties the client to Ontario. See an example of a very detailed reply below.
• Don’t be fooled by phone calls that appear to be from local numbers: A few lawyers have received phone calls from these fraudsters which caller-ID indicated were local calls (i.e. from the same area code). Note that it is very easy to fake or “spoof” an Ontario area code and phone number with calling cards or VOIP phones.
• Don’t be fooled by local addresses and phone numbers: In some cases the fraudsters are providing background details that have a local nature; for example, an address where the couple lived, local home or work address for ex-spouse.

Trust your instincts

No doubt, some of you will say that all or most of the above points match many of your legitimate files. These bad cheque frauds are becoming far more sophisticated and spotting them is becoming much more difficult. In most cases there won’t be a single obvious factor that clearly indicates the matter is a fraud. It will be a number of smaller things that just don’t quite add up.

Trust your instincts. If things don’t add up, ask more questions and dig deeper. Get the client on the phone and ask them to provide further background and explanation for anything that is inconsistent or that doesn’t make sense. Have them confirm details in the information they already provided to you and be especially wary if the client is hesitant or unclear on background facts. Don’t be naïve. In reply to our blast last week one lawyer said, "I’m relieved to hear you say that because I’m feeling sheepish for not having recognized that this was a scam from the get-go."

If you have suspicions, carefully check and verify any background details provided to you. Ask for documentation from the client that will confirm details of any information provided to you. You can do a reverse lookup of phone numbers provided to you or that appear on call display; Google any addresses provided to you. Get the names of lawyers that previously acted for the client or ex-spouse, check online databases to verify they are real lawyers and ask for permission to contact them.

Ultimately, getting the retainer funds or payments from the ex-spouse irrevocably wired to your bank account is the only way to really protect yourself from this type of fraud. If these wires are coming from another Canadian financial institution they should come via the Large Value Transaction System (“LVTS”). If they are coming from a financial entity outside of Canada, the client or ex-spouse’s bank should make arrangements with your bank to wire the funds to your account.

As an alternative to getting funds wired into your account, tell your client that your firm’s policy is that all funds deposited by cheque or bank draft will be held for 30 days or until your firm is able to get confirmation that the funds have cleared.

Finally, you should terminate the retainer if you remain suspicious that the matter is a fraud.

Beware of losses due to exchange rate fluctuations

Three lawyers indicated to us that their banks asked them to make up losses due to exchange rate fluctuations on US dollar cashier’s cheques they deposited that turned out to be counterfeit. These losses ranged from $3000-$5000. In one case the lawyer was successful in having the bank reverse these charges after he elevated a complaint above the branch level indicating that he had been told at the time of deposit that the instrument was valid.

Example of a follow-up message

We have seen several cases where lawyers reported that they received a second message that was a follow-up to the initial email contact. This is the text from one of those follow-up messages:

Dear Counsel

Regards
[Client first and last name]

Example of a very detailed reply to a request for further information

As stated above, the fraudsters are now providing more detailed background information. This is a reply that one lawyer received when they asked for more information:

Dear Counsel,

[Client first and last name].

Cross posted on Avoid A Claim