Attorney Trust Accounts At Risk

Lisa Jaffee, a Risk Control Consulting Director at CNA (a national malpractice insurer), has alerted attorneys of a sophisticated scam being perpetrated against their attorney trust accounts. In her most informative, three-part blog titled “Look Out, Lawyers! Targeted Scam Could Pose Threat to Wire Funds: Help Prepare Your Business” she explains how the scam works:

First, the fraudster hacks into the attorney’s email account and monitors the activities. The fraudster is most interested in emails from the attorney to clients discussing the pending release of client funds.

Next, the fraudster creates a fake email address, closely resembling that of the client. From this fake email account, the fraudster emails the attorney a request to have the intended funds wired into a recently created US bank account. Interestingly, this US bank account is usually created by an innocent party who is told that a 10% commission will be earned if he or she accepts these funds into the bank account and immediately wires the funds to a foreign bank.

Last, the funds are wired into this US bank account and immediately, 90% of the funds are wired into a foreign bank account created by the fraudster. Once in the foreign bank account these funds are near impossible to recover.

During this whole process the fraudster, using another email account, closely resembling that of the attorney, corresponds with the law firm’s client asking for additional time to have the funds wired due to a death or medical issue in the family. This serves to buy additional time to allow the fraud to see its way through to the end.

The end result of this scam is that the attorney could be liable to reimburse the trust account with personal funds so the intended recipient can be made whole. There are certain ethical issues that could arise depending on the due care exercised by the attorney in his or her oversight of the trust account.

Ms. Jaffee does an excellent job in suggesting ways that attorneys can safeguard against being a victim of this fraud. Her primary recommendation is that the attorney always initiate a phone call, to a telephone number known to be valid, to confirm the bank information for the upcoming wire transfer. The attorney should be suspicious of any last minute changes to these wiring instructions.

Ms. Jaffee also addresses important technology security precautions for the law firm as follows:

• Install a personal firewall wall and anti-virus software;
• Ensure that this software is automatically updated and running at all times;
• Install security patches for Windows programs immediately and allow for automatic updates;
• Use the highest level of security settings in your Web browser, and
• Implement strong password policies.

The professionals in Gettry Marcus’ Business Valuation & Litigation Services Group can answer any questions you may have regarding this threat.