Attempts to defraud lawyers through phony legal transactions are a real and growing problem being addressed by law societies across Canada. In this province, many of our members are being targeted with elaborate schemes that have the appearance of legitimacy.
Our experience is that some of the more sophisticated frauds have temporarily fooled both new and experienced lawyers into working through the file opening and initial stages of a matter before the lawyers have recognized or determined they were the target of a fraud. There are variations on these schemes but, ultimately, the intention is to use a lawyer’s trust account to facilitate the fraud.
Below is a list of names associated with fraudulent scams in debt collection, breach of business loan agreements, collaborative family law agreements, divorce settlements, injury settlement fraud and breach of contracts. Many of these have been circulated to members here and at other law societies within the last twelve months.
Be cautious about anyone who contacts you over the Internet, and about emails that do not refer to you by name in the body of the message. Commonly used salutations are “Dear Counsel,” “Good day” and “Dear Attorney.” However, don’t be fooled if a letter does address you by name. Your name and the fact you are a lawyer is widely available information.
Some scenarios should make you suspicious. Does it make sense that a stranger from England, Hong Kong, Japan, China or the US would ask you to collect their money or provide some other service? Is the client willing to pay you too much money for little or no work? Why is the client that purports to be a business using a free email service? As well, look for spelling and grammar mistakes in emails sent to you by companies or individuals asking that you represent them.
Verify the identity of your client, and familiarize yourself with the Law Society’s Client Identification and Verification Rules, Part XVI. Appreciate that compliance with the Rules is a prerequisite for any coverage under your insurance policy if you actually suffer a trust shortfall.
Verify telephone numbers and other information provided. If the new client is a business that provides a link to its website, check that the business name is an exact match with the name used in the website. Sometimes a fraudster provides a website address that belongs to a business with a similar, but not identical, name. Another possibility is the use of a “sub domain” where a legitimate address is combined with an illegitimate address; your response is directed to the illegitimate address. For example, the web address: LawSociety.Bob.com will direct your response to Bob.com.
Legitimate clients will provide a retainer up-front, although beware that in some cases a client may provide a retainer with a well-made bad cheque and a bank may not notify you that it’s a bad cheque until a number of weeks have passed.
If you receive a certified cheque or bank draft, take it to your bank and ask them to verify that it’s legitimate. They can contact the bank on which the instrument was drawn and ask probing questions. If you deposit the instrument, wait for the funds to clear before paying out. Ask your bank to confirm with the institution that issued the instrument that the funds have cleared. This reduces the risk, but may not eliminate risk completely. For instance, a cheque that purports to be drawn on an actual bank account may well clear initially, with the bank later finding that the instrument was bad. You can confirm with the drawee bank, as well, but be certain you are connecting with the real institution (don’t use the telephone number on the cheque to make contact). If you receive the confirmation you need, get your bank or the real drawee bank to confirm in writing that the instrument is authentic and you are safe to pay out on the funds.