|Oregon State Bar Bulletin JULY 2011|
By Kyle Hanson
Crooks using counterfeit checks to defraud unwitting consumers have set their sights on a new group of victims: attorneys.
Phony check scams have plagued bank customers for years, and this new variation on the scheme can be harder to detect at first, especially if the targeted attorney commonly deals with large dollar transactions.
Here is how this fraud scheme typically works: An attorney is contacted via email by an individual or firm outside of the United States requesting services such as collecting a debt, obtaining a business loan or obtaining an alimony settlement. Criminals will sometimes claim they selected the attorney based on a recommendation from the state’s bar association.
To establish the relationship, the attorney might have the new “client” sign an agreement or contract. Having such a signed document might give the attorney a false sense of security that he or she is dealing with a legitimate individual or firm.
Once the relationship has been established, the attorney receives a check to process on behalf of the new client. We have found that these checks are often delivered by courier. In a recent situation, the check delivered looked like an actual cashier’s check.
The attorney deposits the check and soon thereafter, per the instructions from the client, sends a wire transfer of some or all or the proceeds of the check. The funds are typically sent to a recipient in a foreign country such as South Korea, Malaysia, Taiwan or China.
It is only after the wire transfer is sent that the phony check is returned as counterfeit. By then it’s too late.
When a person deposits a check, cashier’s check or money order, the depository bank merely acts as an agent of the owner of the check (normally, the payee of the check) for the purpose of collection of the check.
The depository bank regularly grants provisional credit on the deposited item, pending final settlement or payment of the check. If the person spends that provisional credit or mails the funds to someone else, and the original check turns out to be phony, he or she has no way to recover the lost money and must repay their bank directly.
Keep in mind that even if your bank does not put a hold on the check and initially gives you funds (the provisional credit), it can take up to two weeks or longer for that check to clear. It can take even longer for a bank to determine if a check or money order from a foreign country is valid.
Here are three facts to be aware of to help avoid a loss:
- If an e-mail or internet opportunity seems too good to be true, it likely is false — especially if it involves an individual or firm outside of the United States. Risks of becoming a victim by a fraud scheme are high.
- If you do not personally know the provider of the check, even if they sign an agreement or contract, be on guard. The risk of becoming a victim by a fraud scheme is high.
- If a portion or all of the proceeds of a check must be wire transferred out of the country or withdrawn for a quick return to the provider, the risk of fraud is high.
If you suspect a client’s check might not be legitimate, decline the engagement for legal services.
You could also call the company whose name is on the check. The Wisconsin Law Journal reports that a New Hampshire attorney avoided a large loss by calling the Pennsylvania company that had supposedly offered to hire him to collect a six-figure debt. The company’s comptroller laughed and said 24 other lawyers had also called him after receiving similar offers from a fraudster.
If you believe you’ve been a victim of fraud, immediately contact law enforcement agencies and your financial services institution for help.
ABOUT THE AUTHOR
Kyle Hanson manages Wells Fargo’s Specialty Markets team that serves professional groups, including attorneys, in Oregon and southwest Washington. He can be reached at (503) 886-1445 or firstname.lastname@example.org
© 2011 Kyle Hanson