What to do if money is diverted to a fraudster’s account?
There are multiple scenarios whereby fraudsters will attempt to have you wire funds to a different account than the one that you had intended to fund. Unfortunately, some of those attempts are successful. LAWPRO has received such claims and heard of many others. Here are some tips to assist you if such a fraud happens to you, your clients or someone you know.
1. Contact the bank:
- The person who initiated the wire should ASAP report the diversion to the bank from where the wire was initiated, requesting that they stop the wire. This is not always possible as wires are usually instantaneously dispatched and irrevocable, however, they may get caught in the financial institution’s suspicious transaction filters and be pending.
- Request that the initiating bank contact the receiving bank to stop the wire. Again, it may have been dispatched but might be pending. Request that they contact the bank they sent the wire to and so on until the trail disappears or the money is found and frozen.
2. Report the matter to your local police as a fraud, and the Canadian Anti-Fraud Centre.
3. File a claim with LAWPRO as soon as possible, together with all relevant documents in your possession.
4. Consider filing a claim with your other insurers who may have a policy intended to respond to this type of risk, including but not limited to your professional liability excess insurer, cyber, commercial general liability, crime, computer fraud, and fidelity insurance carriers. It is important that you obtain complete copies of all your insurance policies, including the declarations, policy wordings, and endorsements, for purposes of analyzing the potential coverages available to you. Your insurance broker may be of great assistance to you, in these regards.
5. Obtain an IT forensic audit if it appears that your systems were hacked. Even if you received a spoofed email from a fraudster, the fraudster may have hacked into your systems to determine when to make the request for the wire transfer and which client representative to impersonate.
6. Alert your client to the diversion fraud immediately and request that they consider whether their systems have been compromised and they should obtain an IT forensic audit, where appropriate. The systems of third parties with knowledge of the transaction in issue (e.g., in the email thread) may have also been compromised. Speak with your client about similarly alerting such third parties to the fraud, with your client’s permission. If no system was hacked, consider if this was an inside job.
7. Be prepared to act quickly and work closely with your insurer(s) and other professionals retained. Cooperation between the parties is vitally important in these types of situations.
Fraudsters have sent emails with false bank routing information; they have altered directions or other documents that contained bank routing information and have altered or created false discharge statements with payment directed to their bank account.
Tips to avoid being a victim:
- Review our article Wire Fraud Scams on the Rise: 5 Tips to Reduce Your Risk
- Anytime a lawyer receives instructions to wire money to a bank account and especially if the instructions are updating or changing previous instructions, the lawyer should contact the payee directly by an independent method (not replying to the email sending the instructions) to verify the instructions received and the accuracy of the bank routing information.
- Lawyers should equally advise their clients, or anyone they expect funds from, of the potential for a diversion attempt and to confirm the instructions before initiating the wire transfer.
- Fraudsters will spoof an email address – create a very similar looking address by adding an extra letter/number or changing a character(s). Having hacked into one account, they may spoof other email addresses that were in the email thread to increase your confidence that it is a proper message. It is important to very carefully look at all the email address in the message.
- Lawyers should train the members of their offices in what to look out for and should have regular discussions/training sessions to reinforce the message. Someone from the office may see information or indications that others may not. We have been advised of an assistant following up on her curiosity and exposing a false document that would have diverted funds.
- For general cyber prevention tips, review our Cybersecurity and Fraud Prevention Tips, and subscribe to AvoidAclaim.com for fraud alerts.
Lawyers and their office colleagues must remain vigilant to fraudsters attempts.
If you suspect you are the target of a fraud, call LAWPRO for assistance.