"Avoid A Claim" Blog

The following is the text of a Fraud Alert sent by LAWPRO to Ontario lawyers on June 29, 2010. Due to the response we received from our previous alert on June 17 we felt it was important to make lawyers aware of new details we’ve learned about this scam.

Last week’s fraud warning e-blast on the collaborative family law agreement fraud prompted dozens of calls and emails to LAWPRO. At least 30 Ontario lawyers indicated they had been recently targeted or were in the middle of dealing with a matter involving this exact fraud. These calls and emails have helped us better understand how this fraud works, and how the fraudsters are taking steps to appear ever more convincing and legitimate.

With this follow-up e-blast, we are sharing this information to help you avoid being duped. It is critical that all lawyers be alert to this and similar bad cheque frauds. Lawyers in Ontario and several other provinces are being targeted on a daily basis.

The essence of these bad cheque frauds is an otherwise legitimate-looking client file that creates circumstances that trick you into quickly disbursing funds from your trust account. The following points will help you appreciate that you must be wary of some of the circumstances that might otherwise make a fraud appear to be a legitimate client matter:

• Don’t be fooled by e-mails personally addressed to you: Some of the initial contact messages we have seen are personalized with the lawyer’s first and last names appearing at the start of the body of the message. (See this post on the Avoid A Claim blog for an example of an initial contact message.)
• Don’t be fooled by a follow-up to the initial contact message: Many lawyers who ignored the initial contact message received an email follow-up message asking if they received the initial contact message. See below for an example of one of these follow-up messages.
• Don’t let you guard down because it is a referral from another Ontario lawyer: Two Ontario lawyers that don’t practice family law indicated that they forwarded the initial contact message to lawyers they knew practised family law.
• Don’t be fooled by a referral from a foreign lawyer: In two instances the initial email was drafted to appear that it was coming as a referral from a UK lawyer.
• Don’t be fooled by a British or European name: In earlier versions of this fraud the clients had an Asian name. In most of the more recent attempts the client has a British or European name.
• Don’t be fooled by legitimate looking identification: The fraudsters are providing identification without hesitation. We have seen colour scans of the identification pages of a Chinese passport and US driver’s licences from various states including Michigan, Illinois, and Alabama.
• Don’t be fooled by a “collaborative family law agreement”: We have seen seven different versions of the same collaborative agreement. See one version of it here. The only differences are the amounts owing and the names of the client, the ex-spouse and their respective lawyers.
• Don’t be fooled by detailed background information: We have encouraged lawyers to ask for further background information when there are suspicions as to whether the matter is a fraud. This remains one of the best ways to determine if the matter is a legitimate one. However, the information provided by the client must be carefully reviewed for reasonableness and consistency as the replies to requests for further information are becoming more detailed and convincing. They now include information that ties the client to Ontario. See an example of a very detailed reply below.
• Don’t be fooled by phone calls that appear to be from local numbers: A few lawyers have received phone calls from these fraudsters which caller-ID indicated were local calls (i.e. from the same area code). Note that it is very easy to fake or “spoof” an Ontario area code and phone number with calling cards or VOIP phones.
• Don’t be fooled by local addresses and phone numbers: In some cases the fraudsters are providing background details that have a local nature; for example, an address where the couple lived, local home or work address for ex-spouse.

Trust your instincts

No doubt, some of you will say that all or most of the above points match many of your legitimate files. These bad cheque frauds are becoming far more sophisticated and spotting them is becoming much more difficult. In most cases there won’t be a single obvious factor that clearly indicates the matter is a fraud. It will be a number of smaller things that just don’t quite add up.

Trust your instincts. If things don’t add up, ask more questions and dig deeper. Get the client on the phone and ask them to provide further background and explanation for anything that is inconsistent or that doesn’t make sense. Have them confirm details in the information they already provided to you and be especially wary if the client is hesitant or unclear on background facts. Don’t be naïve. In reply to our blast last week one lawyer said, “I’m relieved to hear you say that because I’m feeling sheepish for not having recognized that this was a scam from the get-go.”

If you have suspicions, carefully check and verify any background details provided to you. Ask for documentation from the client that will confirm details of any information provided to you. You can do a reverse lookup of phone numbers provided to you or that appear on call display; Google any addresses provided to you. Get the names of lawyers that previously acted for the client or ex-spouse, check online databases to verify they are real lawyers and ask for permission to contact them.

Ultimately, getting the retainer funds or payments from the ex-spouse irrevocably wired to your bank account is the only way to really protect yourself from this type of fraud. If these wires are coming from another Canadian financial institution they should come via the Large Value Transaction System (“LVTS”). If they are coming from a financial entity outside of Canada, the client or ex-spouse’s bank should make arrangements with your bank to wire the funds to your account.

As an alternative to getting funds wired into your account, tell your client that your firm’s policy is that all funds deposited by cheque or bank draft will be held for 30 days or until your firm is able to get confirmation that the funds have cleared.

Finally, you should terminate the retainer if you remain suspicious that the matter is a fraud.

Beware of losses due to exchange rate fluctuations

Three lawyers indicated to us that their banks asked them to make up losses due to exchange rate fluctuations on US dollar cashier’s cheques they deposited that turned out to be counterfeit. These losses ranged from $3000-$5000. In one case the lawyer was successful in having the bank reverse these charges after he elevated a complaint above the branch level indicating that he had been told at the time of deposit that the instrument was valid.

Example of a follow-up message

We have seen several cases where lawyers reported that they received a second message that was a follow-up to the initial email contact. This is the text from one of those follow-up messages:

Dear Counsel

Regards
[Client first and last name]

Example of a very detailed reply to a request for further information

As stated above, the fraudsters are now providing more detailed background information. This is a reply that one lawyer received when they asked for more information:

Dear Counsel,

[Client first and last name].

Cross posted on Slaw.ca

The following is the text of a Fraud Alert sent by LAWPRO to Ontario Lawyers today June 17, 2010. Lawyers in Saskatchewan were the targets of this same fraud in May, and I expect lawyers in other provinces are being targeted as well.

Several lawyers have contacted LAWPRO over the last few weeks to advise us they have been the targets of a spousal support collection scam involving a collaborative family law agreement. One Ontario lawyer was successfully duped by this fraud.

We decided to send a warning to the profession as this fraud appears to be targeting many lawyers and the people behind it are very persistent and convincing.

The email communications from these fraudsters have reasonably good spelling and grammar in them. The background details provided appear to be legitimate, including information about residing in Ontario in the past, the ex-husband’s current and past employment etc. The fraudster will provide what appears to be legitimate identification (e.g. a U.S. state driver’s licence) and say he/she is residing overseas at present. The fraudster will readily sign and return a retainer agreement and promise to pay for required work at regular hourly rates. Note, on these frauds there is no promise of a huge contingency – one of the usual red flags of a fraud.

It appears likely that the same people are behind these fraud attempts as the text of the email messages and the collaborative family law agreement sent to each lawyer are more or less identical, save and except for the amount of arrears and the names of the husband, wife and their respective lawyers.

Typical fraudulent email

In several cases, the text of the initial email was as follows:

Subject: Request for Legal Representation.

Body:
Attn: [lawyer’s first and last name]

Hi Counsel,

Yours truly
Wife’s first and last name

Fraudsters follow through
Sending a reply to the initial email triggers a quick reply from the fraudster that includes more background on the couple’s relationship and a copy of a collaborative family law agreement. Most of the terms of the agreement look reasonable and it is drafted to appear that two lawyers assisted in its preparation. A copy of one of those agreements is available here.

Within a day or two of getting the agreement there is another message indicating the ex-husband is willing to make payment, and one or more cheques arrive shortly thereafter. The lawyer is then pressed to wire the monies offshore.

Please proceed with caution if you receive an email message asking you to assist with the collection of spousal support arrears.

Many lawyers are not replying or acknowledging these messages when they are clearly attempted frauds. In cases where it is unclear, lawyers are replying with requests for identification and more details about the client’s current whereabouts and past circumstances of the relationship. They are also explicitly indicating that they will not proceed with work unless they have a signed retainer agreement and have received payment of a retainer.

The information and identification provided by the fraudster can look legitimate, but there likely will be minor inconsistencies or things that don’t add up. The fraudsters’ reply will include a promise to pay the requested retainer. However, when the payment from the ex-husband shows up, usually a day or two later, the fraudster then says take the retainer from money the husband sent.

If there are things that don’t add up, ask further questions and have the client explain any inconsistencies. Do the terms of the agreement look proper and complete? If the agreement provided to you has the names of lawyers in it, check whether they are called to the bar in the appropriate jurisdiction. This recent post on the AvoidAClaim blog has links to provincial, territorial and U.S. state lawyer licensing databases.

If you receive what appears to be a certified cheque or bank draft, contact the issuing bank to confirm that they in fact issued the cheque before you deposit it in your trust account. Even if the issuing bank confirms the cheque is legitimate, do not immediately release or wire funds to the client. Cheques sent to a U.S bank can take a week and sometimes significantly longer to clear.

If you have been targeted by one of these frauds please advise Dan Pinnington (dan.pinnington@lawpro.ca) or call 416-598-5863.

Be on guard as holiday approaches
In the past fraudsters have been particularly active in the days before long weekends and other holidays. Presumably this is to take advantage of circumstances when lawyers and law firms staff will be busy or more distracted with other things. Please be cautious as in light of any interruptions to banking services that may occur due to the G20 Summit and as we approach the Canada Day Holiday.

Please see further information in the Keep your guard up! More sophisticated cheque scams targeting lawyers article from the most recent issue of LAWPRO Magazine. Further fraud prevention information and resources are available on the practicePRO Fraud page (www.practicepro.ca/fraud) , including the Fraud Fact Sheet, a handy reference for lawyers and law firm staff that describes the common frauds and the red flags that can help identify them.

Cross posted on Slaw.ca

Family law matters seem to be the new flavour of the month when it comes to bad-cheque scams. In the past few weeks Ontario lawyers have sent me almost 20 different emails from fraudsters seeking help on matters involving the collection spousal and/or child support.

One message in particular is making the rounds as I have had at least a dozen lawyers send me a copy of it in the last week alone. A copy of that message follows:

To: (lawyer’s personal email address)

Usually these types of messages are a reasonably obvious attempt at a fraud, and they don’t deserve a reply or acknowledgement. Remember that sending a reply to a spammer confirms your email address as a good one which in turn can encourage more spam to that address as spammers can sell lists of live addresses for more money.

However, I have had a few lawyers ask me how the handle these types messages where it is not immediately obvious whether the request for help is legitimate or not.

On the questionable ones I think more care is warranted, both in terms of checking to see if there is a real client there and to be sceptical and watch for red flags that will indicate if it is a fraud. If it looks like the email might be from a legitimate client, send a reply indicating that you can’t act unless your firm completes proper a client identification verification and is properly retained (include payment of a retainer). Where things don’t add up, asking for more details about the circumstances of the matter can also help you determine if it is legitimate or not (if pushed hard enough to explain things that don’t make sense fraudsters will disappear).

As we approach the holidays remember that in the past we have seen more attempted and successful counterfeit certified cheque or bank draft frauds around long weekends and other holidays. Fraudsters like to execute frauds around holiday times as law firm staff can be distracted and bank holidays mean the fraud won’t discovered as quickly.

Keep your guard up so that you don’t become a victim of bad cheque or bank draft fraud.

Remember to use the fraud prevention resources on the practicePRO Fraud Page (www.practicepro.ca/fraud) to help the lawyers and staff in your firm avoid being duped.

Cross posted on Slaw.ca