US Law Firms Targeted By Cyberscams

Hugh Pickens writes "The San Francisco Chronicle reports that last year a Long Beach law firm received an e-mail from a Hong Kong businessman seeking help collecting debts from American customers. After a month of signing paperwork and exchanging telephone calls, the attorney received word that one debtor had sent a $200,000 cashier's check to pay off his balance. The attorney deposited it in his firm's account, subtracted his $10,000 fee and wired the remaining $190,000 to his Hong Kong client. Then the attorney's bank called and told him the $200,000 check had bounced. 'They send me a nice, big, worthless check,' says the attorney. In this case, the bank was able to prevent the wire transfer from reaching its destination, but attorneys say they are on the receiving end of sophisticated scams with increasing frequency that include attacks to steal client data that can be sold or used to learn the details of future litigation."

Comments

How About ...

[WrongSizeGlass]

... no one sends anyone else any money until they verify that the check they've received is good?

The first time I get payment from a client I always wait to see if it clears before moving forward on a project. It's one of the reasons we require deposits before starting work.

Re:How About ...

[ZorinLynx]

Hmm, the solution to this problems seems obvious.

Once a bank tells you that a check you deposited is valid, the bank is now liable for that deposit. If the check ends up being fraudulent in this case, the bank is out the $200,000, not the customer who deposited it.

If we change the law so this is the case, banks will be a lot more thorough about checking the validity of deposited checks. Trust me. :)

Re:How About ...

[BigSlowTarget]

Of course even more refuse to release funds even though they know the check is good. They will not hesitate to put a two week hold on a check and keep it there even if the correspondent bank has removed the funds from the drawing account and credited the bank where the check was deposited after a single day.

That being said, there are very specific rules about how long each type of check can be held. Cashier's checks are subject to short times because it is assumed that one bank can tell if another bank's check is bad. After all, it really only takes a phone call and typing a few numbers into a computer to find out if the a bank issued the check. It is poor systems, incompetence and weak international interfaces that make this kind of thing possible.

Oh and as for changing the rules forget it. The banks have more money, motivation and personal influence with the government than you ever will. Even minor unfavorable changes to their governing laws are now only possible for a brief period in the wake of the recent record breaking financial collapse and scandal. They will be this way until well after you are dead and gone.

Re:How About ...

[Bigjeff5]

No, he didn't wait.

Banks will go ahead and transfer money into the depositor's account before the cashier's check clears if the check appears to be valid (i.e. is not obviously counterfeit), because 99.99% of the time they do clear and it's just efficient business.

You can, however, request a hold on the check and have the bank wait until the check actually clears before the bank transfers the money to your account. If you've never done business with an individual who is issuing you a $200k check, a hold is just plain smart.

All you have to do is say "And as soon as the check clears, we can wrap this up!" Your ass is now covered, and you are 100% guaranteed not to be screwed out of your money. That's what makes cashier's checks so great, as long as the check is legitimate it will not bounce. Only a counterfeit or stolen cashier's check will bounce. The same is not true for personal or business checks, which may have insufficient funds, or credit cards which may be stolen.

If you are willing to wait for the check to clear, cashier's checks are the safest form of money transfer. They are like a slow version of bank-to-bank wire transfers.

Re:How About ...

[Bigjeff5]

If we change the law so this is the case, banks will be a lot more thorough about checking the validity of deposited checks. Trust me. :)

Since 99.99% of cashier's checks clear, you will end up harming the economy far more than you protect it, because banks will start withholding otherwise valid transfers for up to 30 days while the checks clear. Frankly, that would be devastating for the flow of business.

What you suggest is a naive over-reaction to a problem that can be correct with just a little care on the part of individuals receiving cashier's checks. The system in place already works great, and instead of shoving your opinion down everyone's through it gives businesses the option of taking a risk for a greater potential reward. Furthermore, if you've verified the person giving you the check, either by past business or other means, there is absolutely no reason not to trust the cashier's check. Period. Only initial, untrusted transactions should be held, and it should be the business's responsibility to protect themselves, not the bank's.

It's the same kind of naive over-reaction that has us taking off our shoes in airports because one guy tried and failed to bring down an airplane with a bomb in his shoes. The next guy just snuck the bomb in by hiding it in his underwear, what did taking off our shoes accomplish? Just heartache and humiliation for frequent fliers, that's all. Are we now going to have to start taking off our underwear and sending it through the airport scanner?

Re:Also been a problem for regular people

[Anonymous Coward]

Another scam: cashier's cheques.

Here in the UK a cashier's cheque will cost you £25. What do you get for your money?

• If you're the purchaser of the cheque you don't need any guarantee; you already know that your personal cheque is good (even if the person you're giving it to doesn't). So you get nothing.
• If you're the recipient of the cheque, it's only guaranteed if it was properly issued by the bank. So if the cheque is a genuine cheque stolen from the bank, the bank won't honour it. Of course, you can't distinguish between a properly issued cheque and a stolen cheque, so you're getting no guarantee of payment.

Cashier's cheques are a scam for extracting money from dimwits.

I must be a bad person...

[ibsteve2u]

The combination of debt collector and lawyer seems to have removed my ability to sympathize.

"Sophisticated"?

[The Angry Mick]

How many stories of Nigerian scams have we seen in the press over the years? Just because a lawyer fell for one, the scams have suddenly become "sophisticated"?

Methinks the victim has a higher opinion of his intelligence than reality has demonstrated.