LAW PRACTICE MANAGEMENT
Check-Cashing
Targeting
Lawyers
By Emily Eichenhorn
There’s a perception the victims of Internet scams are naïve,
desperate or just not astute enough to know better. Don’t
believe it. Online thieves are a savvy bunch, and even well-
educated lawyers have been duped by intricate deceptions.
In one known scam, the perpetrators prey on their targets’ ignorance of banking jargon and
regulations related to check cashing and fund availability. Well-meaning attorneys have been
tricked into transferring funds from a client trust account by first submitting bogus cashier’s
checks for deposit into the account. Their actions have left attorneys facing not only claims
for reimbursement of the lost funds from their banks, but also with possible professional
liability claims and disciplinary action for misappropriation of client funds.
whAT ThE SCAM LOOkS LIkE
A typical scenario goes something like this: Claiming to have found the firm’s name in an
on-line directory or Web search, Bad Guy hires Attorney by telephone or email (usually from
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LAW PRACTICE MANAGEMENT
another country) for help with a contract dispute. Bad Guy When the funds are removed from a client trust
purportedly is negotiating with company ABC in another account, the attorney also faces the problem of having
state, and hopes that retaining counsel will convince ABC withdrawn another client’s money from the account.
to fulfill its commitment under the contract. Arguably, this could lead to disciplinary action for misuse
A few days later, when returning the signed engagement or misappropriation of client funds. Additionally, if the
papers, Bad Guy states that ABC has agreed to pay and that attorney is unable to disburse those other clients’ funds
Attorney should be receiving a cashier’s check from ABC timely and as necessary – because of the scam or for other
within a day or two. Bad Guy wants Attorney to deposit reasons – he or she could face various professional liability
the check into Attorney’s trust account and await further claims.
instruction about its disposition because Bad Guy has other
matters for Attorney to handle. hOw TO MANAGE ThE RISkS
The day after Attorney deposits the check in his trust First and foremost, attorneys need to exercise a healthy
account, Bad Guy requests the money be transferred as dose of skepticism when approached by potential clients
soon as possible to XYZ Corp. in another country to close a requiring them to deposit and then retransmit client funds.
time-sensitive deal. As a precautionary measure, Attorney Take the time to investigate the risks – to both the client
first checks with the bank to see if the check has cleared. and your firm – associated with any activity that calls for
Three days later, when the bank notifies Attorney that the the quick transfer of money through several accounts.
“funds are available,” Attorney wires the money to XYZ. While the check-cashing scam described in this article
A week later, the bank informs Attorney that the cashier’s is an “ordinary” financial sting designed to make a quick
check was counterfeit and demands Attorney reimburse it hit on the unsuspecting attorney, more complex schemes
for the distributed funds. Bad Guy is nowhere to be found, may have money laundering as a goal. Lawyers who fall
and Attorney is left with a substantial problem. for money laundering schemes, designed to bypass banking
controls and transfer funds to foreign jurisdictions, are
why ThE SCAM wORkS exposing themselves to criminal charges. So, investigate
The hook for the scam is the attorney’s unawareness of both federal and state law applicable to money transfers
the difference between having a check “clear” and the bank prior to agreeing to receive client funds and subsequently
making “funds available” for use. transmit them to foreign countries.
To promote the free flow of funds, federal law and In the same vein, be wary when clients push you to move
regulation requires that banks make funds available for more quickly than you are comfortable. Time may be of
a customer’s use within a few days of their deposit by a the essence in the client’s eyes, but you have an obligation
bank check – even if the bank handling the check has not to fulfill your professional duties and to point out when you
completed the check-clearing process. That process often feel the client’s haste may be detrimental. That may require
takes up to two weeks. While this helps consumers access you to inform the client that you cannot follow through
funds, it makes the bank vulnerable. Thus, the law allows appropriately in the time allotted. If this causes them to
the bank to hold the depositor responsible for the amount of move elsewhere, consider that might be the best possible
the check should it prove ultimately to be bogus. outcome for you under the circumstances.
In a tough economy, when it seems difficult to turn away
whAT ARE ThE PROFESSIONAL RISkS? clients, it is more important than ever to follow good client
Obviously, the biggest risk here is the monetary loss. screening procedures. Take the time to check to see that
Even though the bank told the attorney the “funds were the client is legitimate. Investigate whether the company is
available” for use – which they were – the bank can sue listed on corporate records in the country of origin; ask for
the attorney for return of the funds in the amount of the references; examine papers carefully; run credit checks; and
counterfeit check. While the attorney may argue that the follow your instincts. If something smells fishy, it probably
bank should have explained the check’s and funds’ status is.
more clearly, he or she faces an uphill battle. If the attorney
or police can find Bad Guy, they can try to get restitution, Emily J. Eichenhorn, J.D., is Lawyers Risk Control Con-
but that certainly is nothing to count on. sulting Attorney for CNA Lawyers Professional Liability in
Chicago, IL
Precedent Spring 2010 49