Fraud is on the rise. Scammers are becoming increasingly sophisticated and it is critical that we stay vigilant in protecting ourselves, our clients and our practices. The following frauds are particularly concerning:
- Funds Transfer Frauds
Fraudsters frequently target law firms to intercept communications and trick lawyers into redirecting wire transfers to scammers. These frauds involve impersonating clients, opposing counsel or other trusted contacts. Watch this three-minute video by Director of Underwriting and Claims Michael Mulhern to learn how to avoid becoming the next victim of funds transfer fraud.
Use a checklist for every payment to avoid becoming the next victim.
Top tips:
- Before paying out funds in any matter, verify that instructions sent by email are legitimate through direct phone or in-person contact with the party providing the instructions. If the instructions are from your client, contact your client directly using the original number in the file or meet face to face. If the instructions are from a bank or another law firm, call to confirm that the transfer instructions are legitimate using the number on your file or from a reliable directory. If you are not personally making the phone call to verify instructions, review your assistant’s completed checklist on every payment before the funds leave your account. Never use the contact information provided in the instructing email. Implement a firm-wide protocol to make a verification phone call on every payment of trust funds.
- Be aware that traditional red flags — spelling and grammar errors — are a thing of the past, making secondary verification even more important.
- Do not rely solely on email communication within your firm to confirm the secondary verification. The email purportedly from your assistant advising that verification has been completed may actually come from the fraudster.
- Make your computer network as secure as you can. Ask your IT professional to regularly test for vulnerabilities and talk to them about security, including:
- Using Coalition Control – (www.coalitioninc.com/en-ca/bclaw/control) to actively monitor your risks and supplement the work of your IT resources.
- Using multi-factor authentication (MFA) – Ensure two pieces of information are required to access email or your computer network.
- Routine backups – Regularly back up your systems and secure your information to a location that is separately secured from your network.
- Email security – Email is the single most targeted point of entry into an organization for a criminal hacker. Talk to your IT professional, Coalition or your other cyber insurer, about measures including SPF, DKIM, DMARC and anti-phishing solutions.
- Password management – Create strong, unique passwords for each account. Change them regularly and never share passwords with anyone. Encourage employees to use a password manager.
- Ensure that your firm has network security and privacy liability insurance, either through Coalition or another insurer, or a combination of both. A security or privacy breach can be a terrifying experience. The specialized and experienced guidance from an insurer and its breach response team can be invaluable, in addition to the financial benefit of insurance.
- Real Estate Identity Frauds
In an identity scam, multiple fraudsters may be working together to participate as different parties to a transaction. The vendor, the buyer, the borrower, the mortgage broker, the realtor and a private lender could all be involved in the fraud. They often involve identity theft, imposters and highly credible fake or forged documents and ID.
In this three-minute video, Director of Risk Management Maryanne Prohl describes a common residential real estate identity fraud we have seen.
Here are some real estate identity fraud facts from our claim files:
- While the fraud can happen in any context, almost all imposters posing as owners claim to be off-shore property owners.
- Rental and vacant properties are particularly vulnerable targets.
- Many similar or related transactions involve the same property.
- The client does not require title insurance despite a significant loan, or title insurance has been declined.
- The transaction must be completed in a rush.
- The client recently opened their bank account.
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- Something does not look quite right with the ID and documents, for example:
- Photographs in the passport and driver’s licence are of two different people.
- Signatures are different.
- Passport and driver’s licence expire on the same date.
- Photographs in the IDs are the same although they were supposedly taken 10 years apart.
- Picture ID does not match the borrower who you just met in your office.
- The person is smiling in their ID (not allowed in government ID).
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Be aware of Tarsem Singh Gill, the individual accused of being the directing mind in BC’s largest real estate fraud scheme, and his spouse Surinder Kaur Gill. Read our Notice to Lawyers to learn more.
Be on alert for this new twist on real estate identity fraud: changing or stealing the identity of corporate property owners. This appears to be accomplished by filing a notice naming imposter directors and officers and/or changing the address of the registered office. The fraudsters then retain a lawyer to help sell or mortgage the corporation’s property.
Even the most diligent lawyer can be duped.
Top tips:
- Carefully verify your client’s identity for real estate and loan transactions.
- Be on the lookout for anything suspicious and keep your guard up. Be particularly wary of funds being paid to third parties who are not related to the transaction.
- When in doubt, insist on getting the evidence you need to put your mind at ease. In addition, you may want to do a “drop test,” as a real driver’s licence will produce a “tinny” sound when dropped on a hard surface. If a mortgage broker is involved and you have doubts about the authenticity of the broker, check the BC Financial Services Authority’s records to see if they are currently registered under the Mortgage Brokers Act as required by law. For more resources, see Real estate: Value, identity and other frauds, Private Lending (April 2019 Discipline Advisory), Real estate transactions – know your client primer (Summer 2021 Benchers’ Bulletin) and the Client ID & Verification and Anti-Money Laundering Risk Management web page. If you have questions about these types of scams or verifying your client’s identity, contact Practice Advisor Barbara Buchanan, KC (bbuchanan@lsbc.org or 604.697.5816).
- QR Code Scam – benefit and payroll update for 2025
We have recently been advised of a QR code scam, where the fraudster sends law firm employees a QR code to scan regarding a “benefit and payroll update for 2025.” The trick is that if anyone hovers their device over the QR code and clicks on it, they are taken to a website that steals user names and passwords and may also enable the scammer to install malware.
Stop and think. Never scan a QR code, open a link or attachment in an email or text message from anyone you do not know.
- Bad Cheque Scams
The “bad cheque" scam, a type of social engineering fraud, involves tricking lawyers into believing (wrongly) that real funds have been deposited into trust.
By posing as clients with real legal matters, fraudsters dupe lawyers into depositing what appears to be a genuine cheque, bank draft or money order into trust. On the strength of that deposit, the lawyer then pays funds out of trust. After the funds are gone, the bank discovers that the deposited instrument is a fake and reverses the deposit, leaving your trust account short. Law Society Rule 3-74 (Trust shortage) requires lawyers to protect client’s trust funds and immediately pay sufficient funds into the account to eliminate a trust shortage. Lawyers must also immediately notify the Executive Director in writing of all the relevant circumstances.
The details of the “bad cheque” scam, including the method of payment, may change as scammers work to create a story that seems entirely plausible.
Top tips:
- Learn to identify the scam. Become familiar with the common characteristics and red flags and the ruses, as well as the ongoing twists and developments.
- Keep on top of new variations that we notify the profession about. Make it a priority to read the email notices we send out. Staff can also sign up for free electronic subscriptions to Notices to the Profession and E-Brief.
- Review names and documents that have been compiled for the different names and documents fraudsters have used in BC.
If you have questions about these types of scams or verifying your client’s identity, contact Practice Advisor Barbara Buchanan, KC (bbuchanan@lsbc.org or 604.697.5816).