Nov. 16, 2022 – Targeted trust account scams may result in lost revenue – billable time spent working with a fictitious client – and trust account funds complaints being filed with the Office of Lawyer Regulation (OLR) in cases where criminals are successful, as well as malpractice claims.

Several times over the last few years, we cautioned attorneys to be on the lookout for sophisticated scams targeting lawyer trust accounts,¹ and recommended utilizing OLR guidance to avoid common trust account scams.

This is an important issue that continues to impact Wisconsin law firms, and if you have not read our last few articles, please consider raising awareness of the scams targeting Wisconsin law firms and sharing our resources with your colleagues.

The Newest Trust Account Scam

“We recently were targeted by a scammer claiming to be a representative of a company in Mexico," said the Racine attorney reporting the scam, "who said he was seeking to collect on a settled seven-figure copyright infringement claim against an existing northern Illinois company, the name of which was apparently being used to add seeming legitimacy to the scam. While the request for representation seemed unusual, there was nothing clearly amiss, and approaching our firm seemed to make some sense given our satellite office in northern Illinois. So we tentatively agreed to the representation and sent the alleged client an engagement agreement, requiring an advance payment to our trust account. But we also asked for more documentation at the outset about the relationship of the company in Mexico with the named Illinois company.”

“We did not receive the executed fee agreement and requested payment, but the response email from the representative of the company deferred those things and went on about exactly how the case should be conducted. This raised enough scam signals to prompt our firm to do some more scam searching. The result was finding a nearly word-for-word similar scam using other company names but mistakenly mentioning a detail directly linking it to the current fictitious client scam with which we were dealing. The related scam was recently published on a State Bar of Texas blog post,”² said the attorney.

Detecting Trust Account Scams

While each scam is different, scams have common patterns that include:

• suspicious emails from prospective business clients whose email address is hosted through a free email service, like Gmail, Yahoo, or Microsoft, instead of a .com business email address;

• companies seeking to engage your law firm for collection work when your firm does not include collections as a practice area on your website and where no referral was made from a person or company you know;

• international companies seeking collection from legitimate Wisconsin businesses and solely corresponding with your firm through email; and

• companies promising an enormous contingency payment for legal fees on the collection of large balances.

Keep in mind, scammers have the ability to manipulate the phone number that appears on your caller ID, utilize artificial intelligence to make the caller’s voice sound exactly like someone you know, and create fake job posts that appear to be from legitimate companies.

Mitigating Targeted Trust Account Scams

The intake stage is the first opportunity to catch a fictitious client. Lawyers are required to conduct a conflict check before agreeing to representation and should consider adding some additional checkboxes to their processes. These could include:

• conducting an internet search to see if there is any publicity around the client;

• asking established businesses for proof from the regulatory entities in their jurisdictions that they are permitted to ​conduct business;

• running background checks or searching for online court records; and

• requesting documents to support the underlying claims or actions.

Following the OLR’s advice for scams targeting lawyers and trust accounts can also help in situations where the fictitious client gets past the intake stage and seeks to deposit funds or requests the lawyer to process collection proceeds through their trust account. Those could include:

• holding deposits in trust until the funds clear;

• explaining to clients that trust funds will not be disbursed until cleared;

• verifying the accuracy of contact and adverse party information; and

• ensuring your firm has adequate safeguards to detect and prevent wire fraud.

Another helpful, and often overlooked recommendation, is to train your staff on the various trust account scams. Have discussions about common threats, develop checklists for onboarding new clients and properly handling trust account funds, engage in continuing legal education learning on scams targeting trust accounts, and conduct scam simulations.

Conclusion: Checklists for Identifying Scams

Scammers attack law firm organizations and seek to exploit vulnerabilities in the processes surrounding onboarding new clients and handling trust account funds. They utilize psychological persuasion tactics of promising enormous returns for legal fees for what turns out to be relatively little work on the part of the attorney. The best way to thwart trust account scams is to develop a checklist for onboarding new clients and processing trust account funds, and updating that process at least on a yearly basis, or whenever a change is needed.

If you need advice on best practices for onboarding clients, processing trust account funds, or ways to identify trust account scams, call Practice411 at (800) 957-4670 for complimentary consultation and join the free State Bar of Wisconsin Practice411™ elist to stay updated on current scams.

Endnotes

¹See Christopher C. Shattuck, Scams are Gaining in Sophistication: Are You Protected?, InsideTrack, Sept. 18, 2019; and Christopher C. Shattuck, Trust Account Scams Increasingly Target Wisconsin Law Firms, InsideTrack, Aug. 18, 2021.

²See Joanna Herzik, Scams continue to target Texas attorneys, June 28, 2022.