Check Frauds on Lawyers
Technologyby Jett Hanna
Update January 4, 2016: Check frauds such as these continue to fool Texas lawyers. Last week, we had a fraud and a narrowly avoided fraud reported to us. One of the frauds involved a name reported online here.
There have been a number of reports over the last couple of years about a common type of email fraud against attorneys. Lawyers sometimes misunderstand what types of payment should be considered received funds from which they can disburse. Cashier’s checks and bank checks should not be considered good funds until funds are collected by the lawyer’s bank from the other institution.
In a recent Texas case, a lawyer was contacted by email to help in a debt collection. The lawyer received a check from the debtor that appeared to be a “Citibank Official Check” which was deposited into his trust account at another bank. Citibank had apparently even confirmed orally that payment of the check was forthcoming. The lawyer then wired funds to a foreign client, with whom his only contact had been by email, before the check had cleared. Citibank ultimately refused to honor the “Official” check, and the lawyer was left holding the bag. See Lawyers Warned to Be Wary of Client E-Mail Scams, Texas Lawyer Jan. 26, 2009, online at http://www.law.com/jsp/article.jsp?id=1202427717175.
A variation of this scam has occurred with family lawyers. The client tells the lawyer that they expect their former spouse to pay alimony or child support once they receive a letter from the lawyer. The lawyer then receives a cashier’s or other official looking check. The client says they need the money fast, and that the lawyer can deduct their fee from the proceeds if they send it immediately. The cashier’s check then fails to clear after the lawyer has already forwarded funds. See David Ziemer, Elaborate Check Scams Target Solo, Small-firm Lawyers, April 5, 2010 available online at http://www.wislawjournal.com/article.cfm/2010/04/05/Elaborate-check-scams-target-solo-smallfirm-lawyers.
One of the best ways to avoid these scams is to understand what constitutes good funds. Cashier’s checks, though official looking, can be counterfeited. Simply asking the bank issuing the check whether the check will clear is not enough. Lawyers should always make sure that their bank has cleared any large check before writing checks on their trust account. Make sure there are no holds on the check and that it has actually cleared before relying on it. This advice isn’t limited to avoiding email scams; real estate transactions and other larger transactions involving the lawyer’s trust account should be treated the same way.
Email scams often present a number of consistent patterns. Here are some signs that can help you identify scams.
- Scams often originate from foreign email addresses or free email services, such as Yahoo, Gmail, AOL or Hotmail. While legitimate clients may also use these addresses, if your only knowledge of the client is through email, be particularly careful.
- The email addresses where you are asked to send responses in a scam often do not have the domain of the company you think you are working with. It is not uncommon for a real company to be picked as the client or the payor, but the email addresses used are not on the same domain as the website. Sometimes all it takes is a call to the company who has allegedly sent a check to discover the fraud.
- Scam emails may have an indication that they are a form letter. For example, the email may refer to “your firm” rather than use your firm’s name.
- Links in scams may display one email or web address but point to another. On most computers, you can mouse over a link to see what actual web address is it is pointing to.
- Scammers are often in a hurry. Legitimate clients may be, too, but they should understanding that you need to actually have money before you can pay them.
