Fraudsters Now Using Counterfeit Bank Drafts and ID of Major Banks on Mortgage Deals

This afternoon LAWPRO sent an e-blast warning Ontario lawyers to be on the lookout for the latest fraud scheme targeting them. For the first time LAWPRO is seeing a counterfeit bank draft fraud scheme that targets real estate lawyers on mortgage deals. Furthermore, the new scenario may include the supposed fraudster using the identity of a major national financial institution as the actual lender in the transaction.

This new type of fraud works as follows: A new and previously unknown client or lender contact allegedly from a major bank will ask a lawyer to act on mortgage matter. The source of the referral will be unknown to the lawyer (i.e. a person they don’t know or recognize). Shortly thereafter, mortgage instructions will arrive at the lawyer’s office along with a legitimate looking bank draft drawn on a major bank. Loan amounts to date range from $640,000 to $685,000. Client will be in a rush to complete the deal.

LAWPRO is warning Ontario lawyers be wary if they are handling matters that appear the same or is similar to the one described above. Lawyers and their staff are encouraged to be extra careful when handling mortgage deals. These are very sophisticated frauds. The letters and other documents provided by the client and bank drafts received from the lender will look legitimate – but turn out to be counterfeit.

The red flags to watch for on this type of fraud include:
> Client and/or lender contact are new to your firm
> Source of referral is unknown or not recognized
> Very large mortgage be placed on mortgage free property
> Client is in a rush to complete the deal.

It appears that the people behind this fraud have stolen the identity of the property owner, and that the property owner is unaware that this has happened. Lawyers are encouraged to use the title search, telephone book, Internet and other sources to cross-check client and bank names, addresses, phone numbers and other information in the documentation provided to them.

Lawyers are also advised to protect themselves when dealing with the bank. Don’t rely on oral confirmation from your bank at time of deposit that the bank draft 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. For branches in major centres this often will take one or two banking days, and for branches in more remote locales as long a 8-10 calendar days. See the Show Me the Money article for more information on funds transfers from the Summer 2008 LAWPRO Magazine.

Please read LAWPRO’s new Fraud Fact Sheet at to learn more about the red flags to look out for on matters that are frauds. Or see the practicePRO Fraud page (www.practicepro.ca/fraud) for information on fraud and how to avoid it.