June 20, 2018
Bad Cheque and Social Engineering Scams Continuing into Summer
Alberta lawyers are continuing to be targeted by a steady stream of bad cheque and social engineering scams, as reported by several Alberta law firms.

For example, a firm was retained in a dispute between a Canadian man and his deceased wife’s life insurer, after the wife died outside of Canada. Trouble arose in the collection of a multi-million dollar claim from a life insurer. The retainer provided an irrevocable assignment of proceeds from the insurance claim and would convert to a contingency if litigation ensured. The scam was uncovered when the insurer found the wife was living in Pakistan.

In a separate scam, another firm was asked to act for a foreign buyer of construction equipment for a legitimate company in Calgary. When the company was called, they advised it was a scam.

Two other firms reported that they received emails from an overseas individual (in each case with the same name) requesting assistance to collect a debt. The individual asked the firm to help collect a debt from a debtor (and in one case, provided a copy of his UK passport), then circled back to let the firm know he advised the debtor that he has legal counsel and that the debtor is now ready to pay. In one case, the fake debtor contacted the firm for its banking details and delivered a counterfeit bank draft before the scam was discovered.

In another attempted fraud, an Alberta firm was requested to act for an overseas creditor who was persistent about why he was having trouble retaining legal counsel. In another case, an Alberta lawyer searched the purported debtor’s name to discover that name on a list published by the Law Society of British Columbia with respect to bad cheque scams.

These are all examples of bad cheque or social engineering scams that present as legal matters in which overseas clients (or clients with overseas matters) retain Alberta counsel to recover money from Canadian debtors.

The goal is to dupe lawyers into wiring real funds from their trust accounts to their new client (the scammer) after depositing a bad instrument into their trust accounts. Later when the fraud is discovered, the lawyer is left holding the bag.

Red Flags

Here are some red flags of a bad cheque scam:

  • Despite the client stating a lawyer is needed to push for payment, the debtor pays without hassle.
  • The client says they prefer email communication due to time zone differences or other reasons (for example, a speech impediment).
  • The client is in a rush and pressures you to do the deal quickly.
  • The client is willing to pay higher-than-usual fees on a contingent basis from the (bogus) funds you are to receive, and in some cases, ignores early requests for a retainer.
  • The client instructs you to quickly wire the funds to an offshore bank account based on changed or urgent circumstances.

Action to be taken
If you or your law firm receive any request to handle a legal matter from a client who is from another country, consider the possibility that a fraudster is at work.

To protect yourself:

  • Follow these Client Identification and Verification Rules before taking on a client.
  • Hold the funds until your bank confirms the funds are “good” by contacting the bank that issued the cheque. Have your bank confirm, in writing, that it is safe to withdraw from the deposit. Even this may not be completely risk-free, as banks often reserve the ability to subsequently remove funds from your account.

We also recommend that your firm establish protocols for transferring trust funds and adhere to them.

If you receive communications that appear suspicious, please send an email to the ALIAlert mailbox and, if possible, provide the potential fraudster’s contact information.

The Alberta Lawyers Insurance Association provides the ALIAlert service to all Alberta lawyers participating in the insurance program. If you believe that you were targeted by potential fraudulent activity, please contact ALIAlert so we can alert other members of the profession and avoid losses that increase the cost of insurance.