LAWPRO has received multiple reports of an insurance settlement fraud targeting Ontario lawyers.

The fraudster will meet with the lawyer virtually or in-person at the lawyer’s office and present identification. The lawyer is asked to review insurance claim settlement documents, provide ILA, and receive settlement funds. The documents bear the name of a real insurance company. The identification being presented is fake, but will look legitimate.

The lawyer receives a cheque or bank draft and deposits it into their trust account. The “client” pushes to have the money released as soon as possible. Upon seeing the deposit “appear” in their trust account, the lawyer disburses the funds, but within a few days, the cheque or draft bounces. At this point the fraudster and the funds are long gone.

A copy of one of the drafts used in these frauds appears below. Several claims involved cheques for $667,200, and we are now seeing cheques for $486,200.

Please watch out for this scenario, and do NOT release funds simply because the deposit appears in your trust account. A certified cheque, bank draft, or wire can be credited to the account and subsequently reversed. Review the steps in this article to ensure you have good irrevocable funds.

“Red flags” that can indicate a fraud is occurring:

• The client has no previous relationship with the lawyer/law firm.
• The matter seems unusually straightforward and the client isn’t interested in the details.
• The client seems primarily interested in getting money into and out of your trust account quickly.

How you can avoid being duped on one of these frauds:

• Ensure the funds are irrevocable. See article: When banking credit is good or bad: how to avoid transaction reversals and shortfalls.
• Before treating the matter as legitimate, independently contact the company using contact information you obtain yourself. Confirm that the file or claim number exists and that the settlement is genuine. Be alert to the possibility of a fraudulent website, phone number, and bad actors acting to run a legitimate business. In one case, the fraudster created a convincing duplicate website for the insurance company, including a phone number that went directly to the fraudster. Review this article on website impersonation.

Remember that fraudsters frequently target firms just before a holiday weekend, as they know that this is a time when offices are often short staffed and transaction details might not be checked as closely as they might otherwise be. Also, the extra banking holiday will result in delays in the return of counterfeit cheque or bank draft to the firm.

If you are an Ontario lawyer and have been targeted by one of these frauds, please forward the documents you have received to [email protected]. This will help us understand the scope of the fraud and to collect information that may help us prevent other lawyers from being duped.

If you have been duped on one of these frauds, please immediately report a claim to LAWPRO.

---