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    May 2nd, 2008

    ♫I want the easy
    Easy money
    Easy money
    I could get lucky
    Oh, things could go right♫

    Words and music by Billy Joel.

    There is a a new and quite clever fraud scam being attempted against lawyers.

    Generally, the fraud was attempted by an entity (CreditCo – in this case from Hong Kong) retaining a law firm to undertake a collection against a debtor (DebtCo). The law firm is engaged to write a demand letter to DebtCo on behalf of CreditCo (in this case, for a largish amount of money).

    Low and behold a bank draft arrives payable to the firm in the full amount of the claim! This was the first small alarm as the demand letter did not ask for the funds to be paid to the law firm.

    The lawyers notify CreditCo that they have the funds and CreditCo gets anxious and states that they want the money wired to them ASAP (second small alarm). In other words, CreditCo wanted the firm to circumvent any normal caution or internal controls regarding the bank draft and any clearing times on the draft.

    In this case, the lawyers called the bank at the number listed on the bank draft. Not surprisingly, the telephone number was answered professionally and the bank draft declared to be valid.

    Fortunately, the law firm in question did not accept such assurances at face value. The lawyers, out of an abundance of caution, called their own bank and asked them to make inquiries regarding the bank draft and the issuing bank. Not surprisingly, the lawyer’s bank determined that the bank draft was bogus.

    The bank draft, it should be noted, was entirely professional in appearance. And the entire attempted scam was conducted in a professional manner. Lawyers are cautioned to put into place proper prudent internal controls regarding retaining funds until they are reasonably assured that any negotiable instruments are indeed valid and will be honoured by the issuing financial institution. There is no assurance that any negotiable instrument, bank drafts included, may not be forged. Fraudsters count on trust – and internal controls are designed to place any transaction – no matter how innocent – under a critical eye. Lawyers should be examining every and all financial transactions with a view towards whether the transaction is indeed what it appears to be.

    The increasing sophistication of scams such as this one only reinforces the principle that if it seems too good to be true, if the money seems disproportionate to the services rendered, if the result is just too easy, then the easy money comes with a different kind of price; and the lawyer in question is not lucky when things ultimately do not go right…


    This entry was posted on Friday, May 2nd, 2008 at 11:14 am and is filed under Fraud and theft, Issues facing Law Firms, Law Firm Strategy, Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

    2 Responses to “Another Clever Fraud Scam…”
    1. Luke Says:

      I’m an articled student with a small firm in BC. I had an email this morning, from a “prospective client” trying to set up this type of scam. It’s difficult to distinguish such emails from genuine inquiries; the letter was properly formatted, and read logically and clearly. There were no typing errors, and the writer clearly was familiar with retainers, contingency billing, collections procedures, etc. However, the email did include the phrase, “Let your reaction reach me through this medium” — which somehow made me suspect a scam….

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