New Tactic in Schemes Targeting Lawyers: Wired Funds in Real Estate Transactions

The Louisiana State Bar Association (LSBA) leadership has received information from the North Carolina State Bar about a new tactic from criminals targeting lawyers. This scam involves wired funds in real estate transactions. The LSBA leadership believes it is extremely important that members remain alert, vigilant and aware of these new twists in scams.

The North Carolina State Bar (NCSB) recently received multiple reports of fraudulent activity relating to wired funds in real estate transactions, with losses as high as $200,000. Peter Bolac, NCSB trust account compliance counsel, provided a redacted report received from an NCSB member:

“On a closing that took place on Friday morning, before we disbursed, we received an email and a phone call from a lady purporting to be our out-of-state seller asking us to wire funds to her bank account. On Monday, we learned that the seller’s email was compromised and bad actors had inserted themselves in her place. We attempted to retract the wire and we learned late yesterday that the bank did not retract the wire and will not communicate further without a subpoena.”

Bolac reported that this particular law firm had two-level confirmation practices in place to protect against fraudulent wires, but the hackers emailed and called the firm to confirm the wiring instructions as was required. The hackers gained access to the email account of one of the parties to the transaction and learned the necessary information in order to assume the identity of one of the parties and initiate the fraudulent transaction. Another defrauded firm noticed after the fact that the email address of the hacker was different from the actual seller’s email address by one letter.

Bolac suggested one way to protect against this fraud is for the lawyer to initiate the phone call to confirm the emailed wiring instructions, calling only the number in the client file even if a different number is provided via email. “Be vigilant when communicating over email and consider whether your firm’s wiring procedures are strong enough to detect and prevent these fraud attempts,” Bolac said.

The LSBA also wants to remind members that schemes involving counterfeit checks or phishing emails to gain account information are continuing as well. Although the fraudulent efforts may take different forms, many involve “fake” clients and counterfeit checks.

One version has a lawyer receiving an overpayment on an initial advance deposit for fees. The “fake” client asks for a refund of the overpayment.

In another instance, the lawyer receives a check from a “third party” after minimal collection efforts on behalf of the “fake” client. The “fake” client typically wants the funds immediately and asks for money to be wired. The funds are disbursed before the check is found to be counterfeit.

Sometimes the “fake client” is foreign and seeking to collect child support or another judgment from a U.S. citizen.

In other instances, the legal work could seem more local such as a collection effort for architectural or remodeling work done on property in your area. While the names or property may exist, people’s information may have been lifted and used without their permission by the scammers.

Do not accept facts as face value without more research and due diligence as to the people and matters involved.

The risk for the lawyer is that if a suspect check is deposited into trust, the local bank may provide the lawyer “provisional credit.” If a lawyer disburses funds to the “client,” the lawyer, most likely, would have been later advised that the original check was invalid or determined to be counterfeit, and the lawyer would have had a large sum of money stolen.

Be very careful. If suspicious, ask the bank how long it needs to determine whether a check is counterfeit. Check with your insurer to see if these fraudulent or criminal transactions are covered by your insurance.

Beware of clients you have never personally met or clients who need immediate transfer of funds. Don’t be tempted by receipt of an overpayment of an advance deposit or a fee that appears “too good to be true.”

The LSBA, the Office of Disciplinary Counsel and law enforcement agencies encourage LSBA members to exercise caution and perform due diligence before accepting new cases and performing financial transactions involving the lawyer’s trust account.

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