The Advisory: Volume 9, Issue 3, December 2011
Red Flags Which May Indicate Fraud
Fraud is a real and growing problem for all lawyers, law firms and their staff. The Law Society strives to provide information about fraudulent schemes targeting Alberta lawyers, and share tips to help lawyers prevent frauds and losses from occurring. It is important to become familiar with the indicators listed below and to know the Law Society’s client identification and verification rules. If you are suspicious the matter you are handling may be fraudulent, please contact the Law Society.
You may be dealing with fraud if:
- An email solicitation is received for legal services that allege a referral from an out of province or out of country lawyer/law firm.
- A client ignores client identity or phone number requests, or when subsequent correspondence to the request is sent and there is no acknowledgement that there was a request.
- Clients offer to pay higher than normal fees. This is rarely seen now as “suspected fraudsters” are tending to ask targeted legal practitioners to enclose a retention agreement and particulars in return correspondence.
- An email solicitation is received on behalf of a corporation that is not referenced in the sender’s email address (Gmail, Yahoo, AOL, MSN would be considered red flags).
- Debtors want to settle the debt in a quicker than usual manner sometimes before the practitioner has even taken any action.
- A settlement cheque is received that was drawn on a corporate account that is clearly outside the address parameters of all correspondence. For example a Calgary lawyer in contact with client from Japan dealing with a Calgary debtor, receives a settlement cheque from XYZ company located in California.
- An unannounced client arrives in your office and satisfies all new client criteria. They provide a business cheque for deposit to a trust account. The service requested is to pay invoices on behalf of the new client’s business. This usually happens near closing at the end of the business week or the beginning of a holiday period. Invoices arrive before the cheque clears banking process and disbursements are made from the trust account.
- There is a sense of urgency to the transaction. The client’s business is small and cash flow is strained with the current economy being to blame. Debt is settled immediately and the client requests immediate disbursement (less legal fees) to his/her off shore business account. The debt settlement cheque is returned as fraudulent and the trust account is short.
- There are inexplicable irregularities in the accompanying documentation. This is generally a common debt collection “scam”. Page one of the documentation will indicate the debtor to be a certain person, yet the loan agreement documentation has a totally different name appearing as the debtor. The amount of the debt or the maturity date of the loan could also have changed.
- Any deviation from normal protocol … (if it sounds too good to be true, it usually is.)
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