Description of Potential Fraud:


A Toronto lawyer has reported to LAWPRO that almost $80,000 was removed from his trust account over the last four days by a series of 10 fake cheques. The fraud was discovered when a bank reconciliation was done this morning (Wednesday). All was fine when a bank reconciliation was done last Friday. The cheques were obvious copies of the firm’s trust cheques (cheque numbers were not in sequence and different). The cheques were used to pay off credit cards and 2 were payable to a specific individual. It is not known how the fraudster obtained information about the lawyer’s trust account.

While we have seen fake and altered cheques run through law firm trust accounts on several occasions in the past, LAWPRO has currently received only a single report of this type fraud. Lawyers should be alert to this type of fraud. The circumstances if it highlight the benefit of doing regular bank reconciliations to catch when this type of fraud has occurred, and to stop further cheques from going through the account if there is a series of them.

Law firms could consider implementing Positive Pay or a similar service. Positive pay is a service whereby a firm electronically shares its cheque register of all written cheques with the bank. The bank will only pay cheques listed in that register, with exactly the same specifications (amount, payee, serial number, etc.). This type of system will dramatically reduce this and other types of cheque fraud.

Categories: Fraud Warnings