The following is an excerpt from a fraud alert recently posted to the Alberta Lawyers Indemnity Association (a division of the Law Society of Alberta), with bad cheque scams that could also threaten Nova Scotia lawyers, as well as the red flags that kept the lawyers’ trust accounts from being debited:
“ALIA is warning Alberta lawyers about scams involving loan enforcements and sales of trademarks after phony cheques were delivered to two Calgary firms in attempts to perpetrate fraud.
The first scam was uncovered when a cautious and alert lawyer became suspicious over several red flags before a cashier’s cheque was finally dishonoured.
A fraudster posing as a potential client in Maryland had emailed the lawyer and invited him to discuss the enforcement of a personal loan against his friend living in Calgary. They then had a telephone call and the nature of the claim was outlined. A signed promissory note was sent by email, and without prompting, the fraudster also provided a copy of his Maryland driver’s licence.
The fraudster instructed the lawyer to prepare a demand letter but stated he wanted to make one final attempt to contact his friend by email to see if he could resolve the matter before the demand was issued. The lawyer was copied on this email.
The purported borrower quickly responded via email, agreeing to make a payment, and a cashier’s cheque from a U.S. bank was delivered to the firm two days later. The lawyer advised the borrower that the firm would need at least 10 business days to allow the cheque to clear the trust account before any payment could be issued. The lawyer conducted a title search of the borrower’s address, and someone of the same name owned it. On the 11th business day, the bank dishonoured the cheque. The lawyer contacted the fraudster, who never responded. No funds were transferred.
Fortunately, the lawyer concluded this was a scam before the cheque was dishonoured as he recognized several red flags. In addition, he noted other suspicious activity, such as:
- The funds were recovered with virtually no effort on his part.
- The borrower, a Calgary resident, provided a cheque drawn on an American bank account.
- The area code of the fraudster’s phone number was from New Orleans and not Maryland.
The second scam involved a fraudster posing as a representative of a Taiwan company who retained a Calgary firm to sell some trademarks to a B.C. purchaser. The firm received a bank draft from the fraudster as a deposit for the sale. The scam was exposed when an eagle-eyed lawyer noticed several oddities that prompted him to investigate by visiting a nearby branch of the bank which appeared to have issued the draft. The lawyer asked the branch manager to examine the bank draft, and the manager confirmed it was fraudulent. The lawyer also detected the following:
- The purchaser was based in Port Coquitlam, B.C. However, the bank draft was issued in Mississauga/Toronto rather than Port Coquitlam/Vancouver.
- There was no transit number or branch number on the draft.
Each of these incidents is a bad cheque scam that is presented as a legal matter requiring the service of a lawyer. These scams are designed to trick lawyers into wiring funds from their trust accounts to the creditor or seller after depositing a counterfeit cheque received as payment from the borrower or buyer who is part of the fraud. After the lawyer sends the funds, the cheque is discovered to be bad, and the lawyer is left with a shortage in their trust account.“
Review the NSBS Regulations made pursuant to the Legal Profession Act, S.N.S 2004, c.28, including 4.12: Cash Transactions; 4.13: Client Identification; and Part 10: Trust Accounts.
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, perform all searches as thoroughly as possible, be vigilant and take your time – and beware of any aggressive urgency on behalf of the other parties to complete the transaction. Be cautious with all cheques received, especially if they exceed an agreed upon amount. If you decide to proceed with a transaction, be sure to go to the bank website to verify the 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. Where possible, use the Bank of Canada’s Lynx system (formerly the Large Value Transfer System (LVTS)), an electronic funds transfer system that allows large payments to be exchanged securely and immediately.
For tips to avoid being victimized, and to report or seek advice on dealing with fraud and scam attempts, contact Cynthia Nield at [email protected] or 902 423 1300, x346.