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Public: Recent News

Food for Thought: This Could Happen in North Carolina

Lawyers and law firms should find the following story of interest, if not alarming. It was conveyed to e-bar through a North Carolina bank in an effort to prevent this scenario from unfolding in this state as it has, unfortunately, elsewhere. Of course, if this has happened in North Carolina, e-bar would like to know.

The story goes as follows:

A law firm receives an e-mail from a party who states they represent a business client that needs a local law firm to collect a debt on behalf of the client.  Excited about new business, the law firm accepts the engagement and is assigned an account to collect.  The account debtor promptly pays the debt with a cashier’s check after receiving a demand letter from the law firm.  Days later, the new client contacts the firm by e-mail stating that they heard the debtor paid his debt.  The representative then requests that the law firm immediately wire the funds to a foreign country, like Korea to pay the client's company. The e-mails to the law firm continue with more frequency and more urgency each day.

Anxious to calm an upset client, the law firm wires the money to a bank in Korea where the funds are immediately withdrawn. A few days later the law firm receives notice from its bank that the cashier’s check it deposited was fraudulent and that the bank is charging-back the bad check to the firm's trust account.

The law firm explains to the bank that it thought the check was good because it was a cashier’s check and that before they wired the money they called someone at the bank who said the funds were available.  Unfortunately, it is explained, with the advent of technology, cashier’s checks are easily forged, altered or counterfeited, and a depositor remains liable for any deposit which is not collected. The bank also explains that when an employee states that fund are “available,” it only means the funds have been credited to your account, not that the check has been collected or paid by the bank that (supposedly) issued the cashier’s check.

Specific Red Flags to Keep in Mind

You are asked to wire money out of your account. This is a five-star red flag. If you are asked to do this, run, don't walk, away from the "deal." The basic pattern of all the fake check scams is that the con artists will send you a "cashier's" or "certified" check (or postal money order) to deposit into your account. Then they will give you a reason to quickly wire or express part or all of the money out of your account to them or to some third party they identify. Often the wired money is to go to a foreign country.

You are asked to act very quickly. The scammers don't want you to have time to verify whether the cashier's check or certified check is authentic or counterfeit or to wait for the check to clear. The scammers typically ask you to wire cash as quickly as possible. They know that their fakes are very professional and usually will pass an initial visual inspection at the financial institution taking the deposit. Some counterfeits are so good that it may take weeks to identify the check as counterfeit. At that point, you are left holding the bag: the scam artists have your money and you may even be suspected of fraud.

Fake check scammers often claim to be in another country. That makes it difficult, they say, for them to do business in the U.S. so they need your help to receive payments by checks on U.S. banks. Often you are asked to wire the funds out of the country.

The deal is too good to be true. This old, smart consumer advice holds true in these cases. If a "client" is eager, sight unseen, to enlist your legal services, smell a rat. If after a few emails or phone conversations, a "client" wants to hire you, slow down.

Avoiding the scam

Wait for a cashier's or certified check to actually be collected before using the money. Although your financial institution may quickly make funds available that you've deposited, or may tell you that the deposit has been credited to your account, that does not mean that the check is good or has cleared through the original issuing institution. That can take many days. Sometimes it can take weeks to discover a very good forgery, and the check won't bounce until then. Therefore, verify the check with the issuing bank (the bank which it is drawn on) and then wait for final clearance. All it will take is one insufficient-funds check for your trust account to be in the red. (And you know, of course, that banks have to report to the State Bar when your trust account becomes overdrawn)

Don't be fooled into thinking that the company is real or legitimate just because its website looks good. Some of the sites run by scammers look extremely professional.

Know with whom you are dealing. The law generally assumes that you, not your financial institution, have the best knowledge of the person who gave you the check because you are dealing directly with them. Therefore, if you are dealing with a stranger, make sure you have that person's name address and phone number, then verify those independently using online directories. If the number or address in the directory is different, call the person using those numbers. You may have stumbled into an identity-theft situation and can help another consumer.

There is no legitimate reason for someone who is giving you money to ask you to wire money back by paying more than the amount due. Always insist that the check be in the exact amount or deal in cash. Emphasize that you prefer a check from a local bank or a national bank with a branch in your area.

Your deposits are your responsibility. If you have deposited a check that then bounces, the bank will withdraw the original dollar amount credited to your trust account. If your trust account doesn't have enough money to cover the deduction, the bank may freeze your trust account or, worse, the bank may sue you to recover the funds. The problem for attorneys is that if you hold funds for clients or third parties, you have to hold it in your client trust account. As a result, in this scam, if you're complying with the ethical rules, you would have put the money into your trust account and then you’re disbursing out of your trust account. If the check you deposit turns out to be fake, then you may have converted the other clients' funds in your account.