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Fraud Prevention: Be Wary of Communications

by Troy Crawford |

Wire fraud continues to plague the legal community.

Lawyers Mutual sees claims arising from a variety of problems in the communication chain. Here are some of our tips to avoid being a victim.

Verification of Incoming Wires is Key

I STRONGLY recommend the receipt of funds be verified directly from the financial institution, either by calling the bank, or more realistically, by logging into the bank’s secured portal and reviewing account activity directly. 

Should a hacker have gained control of your email account (or the account of anyone in the transaction), it is easy to send a fake wire confirmation - we have seen it done on other occasions.  In the typical scenario, the hacker has already induced a client to wire money to a fraudulent account.  The attorney likely has been notified the wire was sent or is otherwise looking for the funds to arrive.  In order to delay discovery of the fraud, a fake confirmation, purportedly from the attorney’s bank, states funds are received.  The hacker is trying to buy time - every hour which goes by between the fraud and discovery means the hacker is much, much more likely to get the funds overseas.  The attorney, believing funds posted, very well may disburse the proceeds as previously directed by the client or according to standard protocol. 

A transmission from the bank should only be a signal to check the account yourself, and in no way should be considered proof funds are actually deposited.

Don’t Trust a Fax

Many firms have a policy of receiving wire confirmations via facsimile.  Faxes should in no way be considered more reliable or secure to verify deposits. 

Faxes themselves can be faked or spoofed to appear they are coming from a source other than a sender.  We have multiple wire fraud claims which have come into Lawyers Mutual because attorneys and their staff were under the impression faxes were reliable. 

For more information on the process, google ‘fax spoofing,’ which is illegal, but easily done.

Beware of Relying on Confirmation Emails

From our perspective, the false email confirmation is very concerning. 

A fake confirmation has the effect of shifting the loss from the sender of the wire (who was tricked into sending the wire to a fraudulent account) to the attorney, who now has a negative balance in their trust account.  

The attorney probably wasn’t where the attack originated and may have done everything possible to educate other parties and prevent the attack.  However, by dispersing on non-existent funds, the attorney is now ethically required to immediately make the trust account whole.

Feel free to call Lawyers Mutual if you should have any questions. 

About the Author

Troy Crawford

Troy is Managing Counsel for LM Title Agency, LLC, a wholly owned subsidiary of Lawyers Mutual serving attorneys throughout North Carolina.  Prior to heading the title agency, he worked for Lawyers Mutual as Claims Counsel, focusing primarily on real estate, fraud and technology related claims. His experience includes working as Claims and Subrogation Counsel for a title insurance underwriter and eight years in private practice handing real estate litigation, commercial transactions and residential closings.  Contact Troy directly at 919-585-1182 or troy@lmtitle.com.

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