Loss Prevention Tip #20 How to Handle Fraudulent Scams

In recent months, our members have been targeted (and almost caught) in the following two types of fraudulent scams.

Equipment/Inventory Purchase Fraud: In equipment/inventory purchase fraud scams, a lawyer is retained to act on the purchase of a large piece of commercial equipment. The fraudster will provide documentation about the equipment, or whatever else is involved in the transaction.

The lawyer will be asked to deposit a cheque into the lawyer’s trust account and to wire the balance (after fees are deducted) to an overseas account. Of course, the cheque is fraudulent and the lawyer will be left with a shortfall in the trust account.

In this type of scam, the fraudsters will often use the details of a real company, including web address, names of real employees and the mailing address. The contact phone number and email, however, will be fake.

Business Loan Fraud: In business loan fraud scams, a lawyer is contacted to help an out of Province creditor collect on a business debt from a purported debtor in the lawyer’s jurisdiction. The fraudster will provide documentation about the loan.

When the lawyer has sent a demand letter (or sometimes, before a letter has even been sent) a cheque will arrive. The lawyer will be asked to deposit the cheque in the trust account and wire the balance (after fees are deducted) to an overseas account. Of course, the cheque is fraudulent and the lawyer will be left with a shortfall in the trust account.

How to Handle a Real or Suspected Fraud
If you are acting on a matter that you suspect might be a fraud, or if you have been targeted by any of these frauds please forward any of the emails and supporting documents that you have received to insurance@lawsociety.nf.ca. We will talk you through the common fraud scenarios we are seeing and help you spot red flags that may indicate you are being duped. This will help you ask appropriate questions of your client to determine if the matter is legitimate or not. If the matter you are acting on turns out to be a fraud, we will work with you to prevent the fraud and minimize potential claims costs. We will also post this information on the Law Society’s Website and send warnings to practicing members. We do not disclose the names of firms that have provided us with information.

What can you do to help put a stop to the fraud attempt?
You can simply stop replying to the fraudster’s emails or inform them that you suspect fraud and will not act on the matter. If you have a fraudulent cheque you can destroy it or send it to the fraud department of the financial institution it is drawn upon. You can also report the fraud to the Canadian Anti-Fraud Centre or report the fraud attempt to the police.

What if the fraud has been successful?
If you have been successfully duped, please immediately notify the Lawyers’ Insurance Programme as there may be a claim against you.

Fraud Prevention Information
Identifying Fraud, some tips to consider to protect yourself against fraud and a list of names associated to the various types of email scams which continue to be circulated to our members locally can be found on the Law Society’s website under the Insurance and Risk Management section.