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National Bank of Arizona


Fraud and Your IOLTA


The most recent fraud is an email you receive indicating that your IOLTA account has insufficient funds to pay an outstanding check.  While you are in panic mode, you follow the directions in the email and now the trouble begins.   NB|AZ will not contact you in this manner.  If you receive an email like this please contact NB|AZ at 800.497.8168 and forward the email to abuse@nbarizona.com.  

The next fraud type is more sophisticated and daring.  “Client” contacts you, the lawyer, regarding collecting a debt, purchasing property, collecting on a divorce settlement or a breach of contract.  The client is likely to be out of the state or country.  The majority of the communication will be by email. However, there may be limited phone contact as well.

You will receive a large amount of money in the form of a cashier, certified check or money order.  You deposit it into your IOLTA.  The client then starts applying pressure to get the funds wired or express mailed immediately.  You believing the check is as good as cash and with the FDIC’s next day availability policy, disburse the funds. Then you are notified that the check is fraudulent.  The original amount of the check is withdrawn and a fee may be charged.  This again is when the trouble begins.


Red flags It May Be a Scam:

  • The client’s initial email does not address you personally.  It is addressed as “Dear Counselor” or something similar.  This is a sign it may be a mass email.
  • The email requests services that are not your area of expertise.  It also asks that if it is not your area of practice would you provide them with a referral.
  • The client is out of the state or country.
  • The matter resolves itself very quickly without much effort from you.  You may receive an email from the client stating that the opposing party does not want to get into a legal action and is willing to settle or is sending the check.
  • Client sends a check for the advanced fee you requested.  However, they overpaid and want you to refund the overpayment.
  • The check just does not look right.  Sometimes it is something you just cannot put your finger on, but it just looks off. 
  • The client will ask you to wire funds immediately after you receive the settlement.  

 

How to avoid these scams:

  • Get to know your client.  This is more difficult in the technology world we now live. Fake clients avoid meeting in person and limit phone contact.  They will make excuses as to why they are unavailable (cannot take calls at work, time zone differences and cannot travel at this time).  Verify their identity by doing a little research such as an internet search.
  • Ask your client a lot of questions.  Real clients will happily give you whatever information you request.  The fake client – not so much.  They are trying to make this short and sweet for them.
  • Many clients want their funds immediately. Managing client expectations at the beginning of the representation will go a long way when the funds are received.  Your fee agreement should have language that states you must wait for funds to be collected prior to disbursing to any parties (including yourself).  This will tell the client upfront that no one will receive any funds until they have been collected by the issuing bank.
  • Be wary if they only have a P.O. Box as an address.
  • Do not be fooled that the client or company is real just because they have a professional looking website.
  • If the check is drawn from a local bank, take the check to that bank to verify it or call. 
  • Wait for any deposit into the IOLTA to be collected by the issuing bank.  The State Bar of Arizona recommends you wait 10 business or 14 calendar days before disbursing against any deposit into the IOLTA.
  • Do not use endorsement stamps that have your IOLTA account number.  When the check does not clear and is returned to the fake client, they now have your account information. 


If You Receive a Counterfeit Check:

  • Contact your personal NB|AZ contact or 800.497.8168.
  • May report it to:
    • General scams: Federal Trade Commission at 877.FTC.HELP or www.ftc.gov
    • Internet scams:  FBI Internet Fraud Complaint Center at www.ic3.gov
    • Mail based scams:  US Postal Service at 888.877.7644

 

Resources:

  • NB|AZ offers free software from the financial security experts at Trusteer Rapport.  Click here for more information.
  • State Bar of Arizona