The following is an excerpt from a fraud alert recently posted to the Lawyers Indemnity Fund website (a division of the Law Society of British Columbia). Firms there have recently seen unauthorized withdrawals from their accounts:
Four BC firms have been hit with unauthorized withdrawals from their accounts. In two cases, fraudulent cheques were issued and withdrawals made and attempted from the firms’ trust accounts in varying amounts, ranging from $14,500 to $48,000. While LIF does not provide coverage for this type of loss, we want to alert you to these risks so you can take steps to protect your firm from losses.
In one case, a firm’s receptionist received a call from an individual in Quebec who was trying to confirm whether a cheque they had received made out in the firm’s name had actually been issued by the firm. We do not know if the caller was the fraudster. The receptionist referred the matter to the Controller of the firm. The Controller immediately contacted the bank and discovered that a fraudulent cheque for $14,500 had just cleared the firm’s account. The Controller was able to freeze the account and put a stop payment on the cheque.
It is unclear how the fraudsters targeted the firms or whether they had access to the firms’ systems.
What can you do? Regularly review your bank accounts to ensure no unauthorized payments are being made. A surge of unauthorized withdrawals from law firms in Ontario has made its way to BC. If this happens to you take these steps: (1) Contact your Bank Manager and immediately put a stop payment on the cheques (2) Close the account (3) Open up a new account (4) Contact your IT department (5) Contact LIF so we can continue to monitor the risk (6) Report to your insurance broker for coverage under your crime insurance policy.
For Nova Scotia Members
Review the NSBS Regulations made pursuant to the Legal Profession Act, S.N.S 2004, c.28, including 4.12: Cash Transactions; and 4.13: Client Identification.
Before you open a new client file, be vigilant with every request for services that you receive. Fraudulent requests for services can be made by email, paper mail and courier, as well as individuals who arrive in person to retain you and use your trust account to receive and disburse funds. Be cautious with all cheques received, especially if they exceed an agreed upon amount. When in doubt, contact LIANS for more information on current reported scams and how to avoid them. Remember that you must always confirm a prospective client’s identification in accordance with the Anti-Money Laundering (Client ID) Regulations of the Nova Scotia Barristers’ Society.
In order to avoid fraud in real estate transactions, it is prudent to confirm the legitimacy of the letter with the financial institution that had prepared the letter. If you decide to proceed with a transaction, be sure to go to the bank website to verify branch transit number, address and phone number on the cheque. Wait until the bank confirms that the funds are legitimate and are safe to withdraw from the deposit. You may also choose to use the Bank of Canada’s Lynx system, an electronic funds transfer system in which settlement occurs after the clearing of each individual payment, resulting in the transfer of funds in central bank money from one participant to another. Once settled, a payment is final and irrevocable.