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Fraud: client accounts targeted again

12 February 07

How fraudsters have used altered cheques to perpetrate fraud against legal firms in recent weeks

The Society has been made aware of frauds or attempted frauds on solicitors’ client accounts of three separate firms in recent weeks. These matters are under investigation by the police and the banks involved.

Basically, in two of the cases a cheque was sent to the same mainstream lender in redemption of a loan. The lender apparently did not receive the cheque and in each case the firm put a stop on the cheque and issued a fresh one. Sometime later the missing cheques were presented for payment. The cheque number had been altered as well as the payee and date. The stop that had been put on the cheques was circumvented because the cheque number was no longer the same.

In the third case it appears that at least two cheques from the same firm have been intercepted in the mail. The original cheque appears to have been copied and the details on that copy altered. The copy cheque which was presented for payment was physically smaller than the original, but that was only apparent after the event. The sum payable was reduced from that on the original cheques to below £20,000 in each case. It appears that a significant effort was made in at least one case to travel to the bank branch on which the original cheque was drawn, to present the cheque and access the funds.

While there has been no disadvantage to any clients, in each case funds were withdrawn fraudulently from the client bank accounts. It is likely, in the circumstances, that the firms will recover the funds from their banks but that may take time.

It is important that firms are aware of the threat, and review procedures to reduce the possibility of becoming a target. These cases highlight that well run firms acting in a routine and responsible way may still be targeted by fraudsters.

One of the firms targeted has since decided to avoid cheque payment where possible and utilise electronic transfers or automated payments. This is something other firms are advised to consider.

All firms should check their bank transactions daily for any unexpected or unusual items. It is accepted that this may only highlight something untoward that has already happened, but it may then prevent subsequent items being processed. It may also allow the bank to stop the outgoing payment. If you do operate electronic banking, review the security in relation to who is authorised to operate the system and who has access to passwords and security codes.

And beware the emails

This is an appropriate opportunity to remind firms not to respond to electronic mail, purporting to come from your bank, which requires you to provide details or security information about your account. Most firms will have received such requests. They are very easy to spot when you don’t bank with that institution, but sometimes not so obvious when they appear to be from your own bank. Banks will not ask for details of your account in this way. If you are concerned that the request may be genuine, do not provide the information: contact your bank.

Those who do not have electronic access to review the client account on a daily basis may want to consider how regularly you receive client bank statements. The Accounts Rules require a monthly reconciliation but most firms find that obtaining bank statements and reconciling on a weekly basis, or more frequently, makes the reconciliation process much simpler and highlights any problems sooner.

    Contact Morag Newton, Director of the Guarantee Fund, on 0131 476 8358 if you have any questions or if you have been the victim of a fraud or attempted fraud.