It has been crazy busy here at LAWPRO over the last month or so. Just over three weeks ago, we had calls from a few lawyers who had found themselves as possible targets of a bad cheque scam. They had been retained on a business loan matter in which it appeared the intent was to have them deposit a forged loan proceeds cheque into their trust accounts and then disburse good funds from them. We decided to send an e-blast warning the profession to watch for bad cheque scams.
That e-blast prompted several more lawyers to call us. We saw a number of similarities in the scenarios that they described to us, leading us to conclude there was a large scale and organized fraud scheme targeting Ontario lawyers. That prompted us to send another e-blast, which in turn prompted more even more lawyers who appeared to be targets of this fraud scheme to call to call us. As some of them were preparing to close the deal, i.e. run the bad cheques through their trust accounts, we decide to send a third e-blast. That prompted even more calls.
As of today, we have identified 17 matters where we believe frauds that were part of this organized scam were avoided. These attempted frauds had an average value of $305,000, and had a total value almost $5.2 million. See my earlier SLAW post for more info on how these frauds worked.
Needless to say we are ecstatic about this result: $5.2 million in trust account shortfalls may have been avoided, and a large number of potential and very expensive LAWPRO claims were likely prevented.
But, we are holding our breath. Why? Because we are wondering if some lawyers were caught by this scheme. We are waiting for the second bank-to-bank verifications to happen, at which point we think at least some lawyers might be getting a call from their bank about shortfalls in their trust accounts. “Certified” doesn’t mean what many lawyers seem to think it means. Lawyers need to protect themselves when dealing with the bank. Don’t rely on oral confirmation from a bank at time of deposit that the cheque is good. Don’t disburse funds immediately – even if a client is pushing! Wait until the second bank-to-bank verification before issuing funds from a trust account. Wait at least 2-3 banking days to so. To better understand funds transfers and what certified really means, see the Show Me the Money article from the Summer 2008 issue of LAWPRO Magazine
If you are ever suspicious you are working on a matter that could be a bad cheque scam, talk to someone else for an outside perspective – you may not see things clearly as you are in the middle of the deal. That could be another lawyer, or just call your Law Society or insurer. Please read LAWPRO’s new Fraud Fact Sheet to learn more about the red flags to look out for on matters that are bad cheque scams.
See the practicePRO Fraud page at http://www.practicepro.ca/fraud for more information on fraud and how you can avoid it.
LAWPRO is sponsoring a free webinar today: How You Can Avoid Being Its Next Victim. It is hosted by the Ontario Bar Association. Instructions on how you can attend are here: