Reports of forged trust cheques have spiked recently, with several Alberta firms reporting that forged cheques written on their trust accounts have been passed by unknown persons.
The forged cheques have been given to both lawyers and non-lawyers outside of Alberta in the U.S. and Ontario. The cheques do not involve any matter being handled by the Alberta firms, and the recipients of the cheques have no known connection to the firms in question. It appears the forged cheques are being used to perpetrate a bad cheque scam against the recipients.
The law firms reporting to have been victims of this type of scam are located in Calgary, practice Real Estate Conveyancing and are primarily sole practitioners who have been members of the bar for 13 years or more.
The forgeries are sophisticated, and the cheques are reportedly almost identical to the firm’s real cheques with signatures that are virtually indistinguishable from those of the firm’s authorized signatories. The cheques are out of sequence and in some cases have missed a minor detail, such as the firm’s phone number. It is unknown how the Alberta firms’ cheque details have been acquired by the persons perpetrating these frauds.
The forged cheques have been in the $2,800 range, and in most cases more than one cheque has been forged and delivered. Most of the cases resulted in trust shortages, and one Alberta firm needed to cover the losses from their general account, as the funds were not eligible to be reimbursed by any bank. Generally speaking, the circumstances involved in these cases – forged cheques passed that are not related to any legal matter – would not be covered by ALIA’s indemnity program.
Action to be Taken
Firms that have experienced incidents like the ones described above should notify the Law Society’s
Trust Safety Department. The Trust Safety Department has been offering targeted firms direction, including the following:
- Firms should alert their bank and freeze their trust account, in an effort to stop all cheques and debit transactions from going through their trust accounts.
- The firm’s trust account should be closed and a new one opened.
- All existing trust balances should be transferred to the new account.
- A list of outstanding cheques should be obtained and new cheques should be issued. If there are outstanding electronic transfers, steps should be taken to address these as well.
- Payment instructions should be updated and provided to existing clients and firms as applicable.
- New trust cheques should be ordered.
- A police report should be filed.
- The firm should consider obtaining a commercial crime insurance policy. (ALIA also recommends that firms obtain commercial crime insurance and cybercrime insurance and understand the coverage provided. Not all policies are the same, and commercial insurance brokers can provide advice.)
- Trust accounts should be closely monitored for fraudulent activity. Spotting an issue quickly and immediately contacting the relevant bank can increase the likelihood that payments based on fraudulent instruments can be stopped.
- Firms should consider re-examining the use of cheques and moving to electronic payments. If a firm considers moving to electronic payments, they should also assess the risks involved. Unfortunately, cheques have become very easy to forge, while cybercrime attacks (including social engineering incidents designed to dupe law firms and their clients into diverting client funds electronically to third party bank accounts) have become fairly widespread against Alberta law firms.
Specific questions regarding the foregoing can be directed to the Law Society’s Trust Safety department via
email or at 403.228.5632.
