Wednesday, August 29, 2018

Email Scams? Check Scams Are Alive and Well

I get emails from my title insurance company and trade associations all the time describing internet scams perpetrated on lawyers. The context is usually the attorney conducting a real estate closing where the attorney is required to receive, briefly hold, and disburse funds, often hundreds of thousands or more dollars. These often involve fake emails bearing almost identical return addresses and logos. Requiring timing and the ability to construct fake email addresses and websites very quickly, they seemed to me to be the most sophisticated scams.

The case of Sarrouf Law, LLP v. First Republic Bank appeared in Lawyer's Weekly this week  and it caught my eye because it seemed like a version of the most common internet check scam for which we all receive several junk emails a day.  An attorney at a law firm received an email from someone who needed the law firm to accept a check and wire funds to purchase construction equipment. The law firm was to be compensated for merely accepting and transferring the funds. The law firm deposited the check, the bank provisionally credited the account, the law firm wired the funds as directed to banks in Cambodia and Hong Kong, and soon thereafter the bank returned the check unpaid as 'altered/fictitious'. The amount for which the law firm was ultimately found liable was $311,000.00.

The laws at issue in California and Massachusetts, where the banks at issue were located,  permit a bank to provisionally credit an account but, within certain time thereafter, revoke acceptance of the check. When the law firm sued its bank, the court found the bank had followed the rules for revoking its acceptance of the check, and the law firm was liable for the loss.

It's easy to view these cases as evidence of greed or stupidity, but I'm sure there is quite a bit more to the story than the above article or the court's opinion show. Apparently the fraudsters' contacts and bank accounts, etc. checked out. The law firm's attorney said the scam was very sophisticated, and I don't doubt it. 

The speculation is that if the law firm had waited six or seven more hours before wiring the funds, it would have been notified the check was not good and avoided losing any money. A lesson in caution to us all.

No comments:

Post a Comment