Scam Wars — Attack of the Cloned Checks
Check cloning is the latest scam targeting Florida lawyers.
Shanell Schuyler, director of ACAP/Intake, said The Florida Bar has recently been made aware of about 20 instances of cloned or counterfeited trust account checks. Sophisticated, organized fraudsters have obtained the trust account banking information of Florida lawyers and have reproduced trust account checks that are nearly impossible to distinguish from the real thing. The fake checks contain all the information needed to pass as being written on the real trust accounts.
“The lawyers still have the physical checks sitting in their checkbooks in their offices; however, the bank receives a cloned check and sometimes processes it,” Schuyler said. “Lawyers who are diligent about monitoring their trust accounts catch these cloned checks quickly. However, lawyers who are not so diligent may find themselves responsible for paying back thousands of dollars to their trust accounts pending the outcome of the bank’s investigations.”
As it’s been noted many times, attorney trust accounts are attractive targets because they often hold substantial amounts of money and perpetrators hope their thievery goes unnoticed until after they have made away with the cash. While the lawyer may have recourse to recover the stolen funds from the bank if it honored the cloned check, in the interim the lawyer must deal with a shortage in the trust account and outstanding checks that may bounce.
“I’ve just seen an explosion of this stuff,” Schuyler said. “For the most part banks are catching these early and they are not getting through, which is great. But a few lawyers have reported the cloned checks clearing their trust accounts and they have had to proactively put that money back into their trust accounts pending the investigation by the bank.”
Schuyler said the scams work because the fake or cloned checks generally look so much like real checks that it’s very hard for even bank employees to detect. In one instance reported to the Bar, a scammer recreated two checks purportedly drawn from the firm’s trust account and deposited them into two separate banks. The bank holding the trust account honored the recreations of the checks and debited the trust account, even though they were not exact replicas of the firm’s real checks.
The fraud was not discovered until the firm was conducting routine account reconciliation at the end of the month, forcing the firm to transfer thousands of dollars of non-trust funds into the trust account to make up the difference.
Advanced graphics and printing technologies allow scammers to easily create cloned checks, adding a sense of legitimacy to the scams.
Schuyler provides some suggestions to avoid potential theft from cloned checks:
• Set up safeguards with your bank to ensure that you know what checks are coming through the trust account.
• Conduct daily or weekly monitoring of trust account activities.
• Deposit mail enclosing trust account checks in a trusted U.S. Mail receptacle or directly with the postmaster.
• Make sure your trust account checks have built in security features (watermark, security strip, etc.)
• Ask your clients to never share photos of settlement checks on social media.
• Enroll in a bank’s positive pay program so only law firm approved checks are honored.
• Review your trust accounts regularly to look for unapproved or unidentified transactions.
• In the event you find a cloned check, work with bank representatives and local law enforcement to resolve the issue and report the occurrence to [email protected].
Schuyler said the good news is that banks, especially the big ones, are getting better at recognizing the fraudulent cloned checks and are returning the money to the trust accounts much quicker than they used to.
Schuyler said the Bar works hard to keep up with the scams going around so it is equipped to stay on top of them. That’s why she urges consumers and lawyers alike to let the Bar know about fraudulent activity, especially if it involves a trust account, by contacting ACAP. If something sounds fishy, don’t take a chance. Report it.
LegalFuel — The Practice Resource Center of The Florida Bar, also has additional resources available on its website to help lawyers recognize and avoid becoming victims of a scam.
