Keep Your Guard Up
The Law Society of Alberta continues to receive calls and emails from lawyers who find themselves the targets of attempted frauds.
The following are highlights from the spring issue of LAWPRO magazine which uncovers sophisticated cheque scams targeting lawyers. Red flags of fraud are identified, information is provided on how fraudsters have changed their tactics, and steps are outlined to enable lawyers to avoid being duped.
How to Avoid Becoming the Next Victim of Fraud
Fraud is a real and growing problem for all law firms and their staff, and it's not just real estate firms being targeted. Litigators and corporate/business lawyers need to be aware that they are now being targeted. There are two common fraud scenarios unfolding: business loan fraud and debt collection fraud. Lawyers should also be aware of Employee Fraud, Real Estate Fraud, and the many other faces of fraud.
Business Loan Fraud
In the first scenario, a new client introduced to you by a broker or a former client, is in the process of setting up a business and is borrowing money to buy inventory or materials. The loan documentation looks legitimate and the deal is processed. A certified cheque is deposited in the lawyer’s trust account. The lawyer draws a certified cheque on his/her trust account as directed. Several days after that cheque is cashed, the lawyer is advised that the deposit cheque is counterfeit and there is a shortfall in the trust account.
Using this type of scheme, fraudsters successfully duped 10 lawyers over the 2007/2008 Christmas and New Year holiday time. They struck again just before the 2008 May long weekend and four more claims were reported and four more lawyers were left with shortfalls in their trust accounts.
The lesson? Be extra vigilant during periods of time when there are banking holidays. When banks are closed for a day and offices are short staffed, the fraudsters have more time to complete their plans.
Debt Collection Fraud
This type of fraud targets litigators and family law practitioners. The Law Society is seeing an increase in emails requesting the lawyer to assist in collecting money from an ex spouse pursuant to a collaborative law agreement.
In other cases, a new client will contact you seeking representation on a debt collection matter. As payment you will be promised a larger than usual portion of the recovered proceeds. All the documentation will look legitimate, and it will include copies of invoices, demand letters, etc. Phone calls to the creditor will be answered and messages returned. It will be the easiest debt collection you ever do. After just a single call or letter a certified cheque will be delivered to your firm. The cheque will look authentic and have all the normal security features. You will be asked to send the funds, minus legal fees, to an offshore account. And a few days after that you will get a call from your bank advising you that the cheque was counterfeit and that there is a shortfall in your account.
Value, title and identity fraud are now commonplace in commercial and real estate transactions, and lawyers tend to be much more alive to these issues when meeting with new clients. However, they may not appreciate that long-term employees are also responsible for millions of dollars of losses each year.
Be aware of fraud on the inside, when partners, associates or staff commit fraud.
Real Estate Fraud
Five years after becoming a major concern to the real estate bar, claims related to real estate fraud continue to increase in both number of claims and the cost of those claims.
The Many Faces of Fraud
LAWPRO also provides a special report on ithe following identity & value frauds:
- Simple yet sophisticated: warning signs of identity fraud;
- Identity theft with a difference, and warning signs of corporate identity fraud;
- Flip/value fraud schemes, when all that glitters is not gold;
- Warning signs of value frauds; and
- Tips for lawyers; and what to do when you suspect a fraud.
- Build a better checklist;
- Be wary of providing identification services;
- Protect security of PSPs;
- Implement internal controls; and
- Enable collaboration between organizations.
Download a LAWPRO presentation on what frauds look like and how to avoid them. You can download and listen to the MP3 (audio) file and the program PowerPoint presentation. Go to LAWPRO.