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Check Scams on the Rise, again.
OBLIC is seeing attorneys around the state fall for fraudulent check scams. The scams recently have followed a similar pattern. Make yourself aware of the common facts to avoid becoming a victim.
The names and places have been changed but the below represents example communications exchanged in two separate fraud instances involving different insureds.
All of the fraud schemes start with a basic solicitation. The example used involves the alleged sale of medical equipment but we have seen hook emails that are targeted based on advertised areas of practice.
The fraudster will typically impersonate a real person , at a real company but utilize an email address that is either generic or close to the real person's email address.
The amount of money being obtained via fraud using these schemes is significant. A recent statement by the FBI has reported approximately $26 BILLION in fraudulent obtained funds from schemes similar to ones targeting attorneys . The days of poorly typed emails full of major grammatical errors are a thing of the past. There is serious money to be gained from even a single successful fraud; they put the time in to appear as legitimate as possible.
The feigned sophistication and details provided make it difficult to write this solicitation for legal services off as fraud. They will return the engagement letter you sent them. They will follow-up with you on providing the requested documents to start the representation. In one fraud reported to OBLIC, the fraudster went as far as calling to follow-up. There is serious money to be gained by setting the hook in an attorney who responds to their bait, they will take the additional steps to complete the scheme.
With an affirmative action by you, such as sending an engagement letter or fee agreement, they get you to think of them as a potential client rather than a fraud that is going to be stealing from you and your clients.
You will receive a purported cashier's check via FEDEX or UPS that was expedited to your office. As soon as you confirm receipt of the cashier's check the next steps happen in quick succession and with a hurried timeline that is supported by the fake narrative.
Regardless of the fraud, or the fake narrative, or even if this is a real client, you can still protect yourself, and your other clients , by not wiring the funds until they are received and in your account. Received and in your account is not the same as available .
Under the Expedited Funds Availability Act , for deposits greater than $5,000, banks can make part of the deposit available depending on the number of business days from deposit, but generally, the entire amount must be made available seven business days from the date of deposit. This does NOT mean the check is good or the funds are actually received. Fraudulent checks can take weeks to be fully resolved. Until the bank confirms that the funds have been received and are in your account, not just made available, you could be held responsible for any funds you draw against that fraudulent check.

The fraud will require you to wire the funds out of your account. This is because wired funds are transferred immediately, unlike a cashier's check which takes time to negotiate. The wiring instructions for the recent fraud schemes were to U.S. banks, but in a different state than the transaction and parties.

Once the wire is issued, the fraudster's mule picks up the funds at a branch or transfers the funds elsewhere. The money you wired evaporates. You will eventually receive a chargeback against your IOLTA that wipes out any client funds you were holding in trust and you will face a large negative balance and a disciplinary inquiry.
The OBLIC policy provides limited coverage for loss of "Client Funds" attributable to disbursements made in reliance on a fraudulent or counterfeit instrument. OBLIC will not pay the amount you are responsible for in excess of "Client Funds."
For example, you deposit a $150,000 cashier's check into your IOLTA that has $5,000 in other client funds. You wire out $125,000 once they are made available by the bank. You receive a chargeback of $150,000 which puts your IOLTA account in the negative by $120,000. Per Exclusion (q), LPLP-1s (05-2018), OBLIC would reimburse the $5,000 in "Client Funds" you improperly transferred due to the fraud. You will be left with the negative account balance of $120,000 that you personally owe to the bank.
Regardless if it is a scam or a real client . . .
always, always, always wait until the bank confirms that the funds are received from the payor's financial institution , not just made available, before transferring any amount out.

Please contact me at cmarsh@oblic.com if you have any questions!
Carl Marsh, Esq.
Claims Counsel
Ohio Bar Liability Insurance Company
Need more information or a quote? Call 800-227-4111, we would love to talk to you.
Ohio Bar Liability Insurance Company
P.O. Box 2708, Columbus, OH 43216-2708 
Phone: (800) 227-4111 or (614) 488-7924
Fax: (614) 488-7936