Lawyers are increasingly receiving emails from alleged potential clients who supply legitimate looking but bogus checks and then develop reasons why some or all of the money has to be wire transferred to institutions or individuals who are usually in foreign countries.  We expect these fraudulent activities to continue and we want to help our policyholders avoid these situations. While the checks are transmitted in a way that appears to be legitimate, they routinely turn out to be bogus.

The same scenario is common with each of these scams. The law firm receives what appears to be a cashier’s check drawn on a legitimate domestic or foreign bank from a prospective client for a legitimate sounding business purpose. The law firm deposits the check in their client trust account. Almost immediately, the firm is besieged by the prospective client with urgent requests to wire transfer some or all of the proceeds of the check to banks or other recipients usually in foreign countries for legitimate sounding emergency needs. The original check turns out to be bogus.

I am enclosing a copy of a practice update on this topic written by our General Counsel, Joseph Marconi of Johnson & Bell in Chicago, that was emailed to all of our policyholders a few months ago. Joe points out a particularly dangerous trap for the unwary: just because a check deposited in a lawyers trust account has “cleared” does not guaranty that the funds have actually been collected or that the check won’t eventually bounce.  Actual collection of funds may take much longer than you would expect.

As an example of this scam, one firm received a large check purporting to be a cashier’s check issued by a large Canadian bank from a buyer purporting to be in China which was to be used to finance a portion of the purchase of real estate in Illinois. The firm deposited the check into their client trust account. The firm then received two emergency requests to wire transfer a portion, but by no means all, of the original amount to recipients in Asian countries for legitimate sounding reasons. The Canadian check turned out to be bogus. Subsequent information confirmed that the designated wire transfer recipients were bogus as well.

Be vigilant regarding similar scams. Common elements here are: a potential client you have never represented, a “cashier’s” or similar check which appears to be genuine, and emergency requests to make wire transfers before the funds from the original check have actually been collected.

This fraud alert was previously sent to all ISBA Mutual Policyholders. It is being shared with all ISBA members to help everyone avoid scams of this type.

Jon W. DeMoss,
President & CEO
ISBA Mutual Insurance Company