In this issue:
• Organized Fraud Underway
• Fraud: How to avoid becoming its next victim
• Bad Cheque Scams - Red Flags and Tips
• Real Estate Scams - Red Flags and Tips
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Organized Fraud Underway
Fraudsters often hit just before or during a holiday period. With law offices often short staffed and with an extra banking holiday, the fraud is more likely to go undetected, until, for the lawyer, it is too late.
The following information comes from LawPro. It also includes information from LawPro's recent email to Ontario lawyers related to an organized scheme underway to defraud Ontario lawyers.
From information gathered by LawPro, it seems clear there is an organized scheme underway to defraud Ontario lawyers using matters involving small business equipment loans. These matters all share the same basic timeline and circumstances, and in some cases, the same purported individuals or entities (a lender from Halifax).
In all cases, about one month ago, a previously unknown client retained the lawyer to do an incorporation. The client presented realistic looking photo ID (a newer Ontario driver licence). The client paid in full for the incorporation.
In the last week, the client returned to the firm asking the lawyer to act on an equipment purchase loan matter. Loan amounts are approximately $350,000 and the loan is to come from a Halifax-based lender (there is someone answering the phone for the lender – we suspect the fraudster or an accomplice). The client is pushing to have the loan completed as quickly as possible. The loan proceeds are to go to a third-party corporation (not the client’s new corporation).
There are clear badges of fraud in the above scenario. The lawyers’ suspicions were also raised for one or more of the following reasons:
- the client and corporate addresses were the same;
- it is unusual for a brand new corporation with no apparent purpose to get a loan in this amount;
- the only security for the loan was a promissory note or GSA;
- the client had only a cell number or the home phone number given was not working, and
- the address on the driver’s licence is not a real one.
Over the past year, almost 20 of these types of fraud schemes were reported to LAWPRO during the various holiday/long weekend times.
Please be wary if you are handling a matter that appears the same or is similar to the ones described above. Clearly there appears to be an organized fraud scheme targeting Ontario lawyers. Lawyers and their staff are encouraged to be extra careful in the next few weeks. Remember that these are very sophisticated frauds. The letters and other documents provided by the client and the certified cheques or money orders received from the lender will look legitimate - but turn out to be counterfeit. Cross-checks and searches on the names, addresses, serial numbers or other information in the documentation provided will prove to be false.
Please read LAWPRO's new Fraud Fact Sheet at http://www.practicepro.ca/practice/pdf/FraudInfoSheet.pdf to learn more about the red flags to look out for.
Or see the practicePRO Fraud page http://www.practicepro.ca/fraud for information on fraud and how to avoid it.
For more information, visit www.lawsociety.ab.ca
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Fraud: How to avoid becoming its next victim
Fraud is a real and growing problem for all law firms and their staff. Each year, fraudsters "trick" dozens of law clerks and lawyers, young and old, in practices large and small, into helping make fraud happen.
Fraudsters come in all shapes and sizes. They could be the promising new "clients" who just walked in off the street. Or a third party you never do get to meet. Or a member of an organized crime syndicate who is laundering money through your trust account. Or even a colleague whom you'd never suspect.
And it's not just real estate firms that are being targeted. Litigation firms, firms specializing in corporate commercial work, wills and estates, lawyers and others also are frequent targets.
How can you protect yourself and their firm? Take some time to read this information on fraud. It explains the most common fraud scenarios and how to spot them.
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Bad Cheque Scams - Red Flags and Tips
Fraudsters retain the firm on a contrived legal matter so that they can run a counterfeit cheque or bank draft through the firm trust account and walk away with real money. When the bad cheque or bank draft bounces, there will be a shortfall in the trust account.
The following information from LawPro explains the most common fraud scenarios and how to spot them.
Business loan fraud
• New client retains your firm’s services to help with buying small business equipment or inventory.
• Documentation in client’s file looks real (invoices, letters, etc).
• Background checks (corporate or PPSA searches) may look normal.
• You’re asked to represent lender and borrower.
• Certified cheque from "lender" arrives promptly, gets deposited to your trust account.
• Certified cheque looks authentic and has all normal security features.
• Funds are disbursed to the client.
• Days later your bank tells you the cheque/draft is fraudulent.
Debt collection fraud
• Generally targets litigators.
• New client (often offshore) contacts your firm seeking representation on a debt collection.
• Client provides legitimate documentation including invoices, demand letters, etc.
• Collection is hassle-free; debtor returns calls and pays up promptly.
• Certified cheque looks authentic and has all normal security features.
• You’re instructed to send funds, minus legal fees, to an offshore account.
• Days later the bank tells you the cheque/draft is fraudulent.
RED FLAGS
• Client is offshore, unknown to the firm and/or in a rush - pressures you to "do the deal" quickly.
• Client willing to pay higher-than-usual fees on a contingent basis from (bogus) funds you are to receive.
• Client shows up around banking holidays - when banks are closed and offices short-staffed.
• Debtor pays without any hassle – unusual given client’s need to retain you to get payment in the first place.
TIP: Dig Deeper
• Do a reverse phone number search on the company and use Google to verify phone numbers, addresses and e-mail contacts.
• Contact the company to confirm that they are expecting debtor’s payment or business loan.
• Go to bank website to verify branch transit number, address and phone number on the cheque.
• Hold funds until your bank confirms the funds are "good" by contacting the other bank, and it’s safe to withdraw from the deposit.
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Real Estate Scams - Red Flags and Tips
For information on Real Estate Scams, please read LAWPRO's new Fraud Fact Sheet at http://www.practicepro.ca/practice/pdf/FraudInfoSheet.pdf to learn more about the red flags to look out for.
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PBLA Winter Newsletter
Pro Bono Network News, the Spring/Summer 2009 newsletter of Pro Bono Law Alberta is available at www.pbla.ca
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