The recent alert from the Law Society on firms being targeted by fraudsters in the area of litigation has caused a flurry of interest on professional networking sites and blogs, with lawyers from around the world reporting being approached with variations on the scam.
While the fraudsters are continually changing their approach, a number of features are currently ‘trending’:
- Smaller firms or more junior lawyers are approached by email.
- Sometimes the client presents as a foreign corporation, other times as a small business.
- Where the client is allegedly a corporation, the website is often only in English, has limited information and limited contact details despite allegedly being involved in international trade.
- The alleged debtor company may be a large well funded organisation with a comprehensive website. In fact you will be put in contact with a person pretending to be from the debtor company.
- The client and the debtor may not appear to be in the same line of business or the description of the area of business will be very vague.
- The client has sent a pre-action letter naming the firm as their lawyer just prior to or at the point of engaging the firm.
- The cheque from the debtor, often drawn on a foreign bank, is sent to the firm before they have contacted the debtor.
If the approach from the client is designed to commit fraud then, because the cheque is drawn on a foreign bank account of a large well funded company, the bank may provide cleared funds to the lawyer and it may be some time later that it is discovered this cheque was either stolen or fraudulent. The lawyer may then find themselves out of pocket or in dispute with the bank.
If the approach from the client is designed to move illicit funds, then even though the cheques clear, the lawyer will have assisted in the money laundering, even if they did not mean to.
It appears that in many cases more junior lawyers are accepting the client without appreciating the hallmarks of the fraud or laundering methodology. It is only after the cheque has unexpectedly arrived or later been found to be fraudulent that either more senior staff or the money laundering reporting officer are alerted.
While an earlier article provided a number of tips for protecting the firm, taking into account the further information, firms should also:
- ensure all staff likely to respond to email approaches from clients are aware of this methodology
- have a process of escalation to more senior staff where warning signs in line with the methodology are apparent, and
- have a clear position on situations where clients include their details in pre-action letters and on any payments sent when the firm has not made any contact with the debtor.