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

Well...

[santax]

Your a lawyer.... go sue 'em boy!

Re:Well...

[sjames]

There is still a substantial impact from banks being allowed to unwind a transaction at their leisure. In the day and age when people can download a newly released movie from halfway around the world and have it on a DVD before it hits the store shelves (and occasionally before it even hits a public theater screen), there is no good excuse for not being able to say once and for all if a check is good or not within 24 hours.

There is no reason to accommodate the long gone need to send checks to the main branch via stagecoach and hear back a week or two later in the modern age. Banks should be required to verify and reserve the funds within a very short time and should at that point be unable to pull it back. If they are unwilling to join us here in the 21st century, let them assume the risks. So far, the only 19th century trappings they have cast off is their air of respectability and their drive to avoid any behavior that even looks like it might be improper. By charging more and more for less and less, they are becoming a big drag on the economy (which they have recently wrecked with little consequence to themselves).

Also been a problem for regular people

[Kjella]

Classic scam:
1, Scammer pretends to be a buyer for some fairly expensive product, e.g. a car
2. Scammer sends false cashier's check to client
3. Scammer asks to cancel the deal because of some crisis, offers to cover any expenses he's had and a compensation for wasting their time
4. Many people will have compassion for their situation and agree to undo the sale
5. They wire the reminder - maybe 90% of the purchase price - back
6. The check sent in #2 bounces, the money returned in #5 gone and they're out a ton of money
7. Profit, for the scammer. No ??? here.

Re:Also been a problem for regular people

[WrongSizeGlass]

Mod parent up for successfully combining a car analogy and a 'Profit!'. If they'd included a Linux reference they would have earned the coveted Slashdot Hat Trick.

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 ...

[Jah-Wren Ryel]

The first time I get payment from a client I always wait to see if it clears before moving forward on a project.

You should know then that checks never clear. They just fail to bounce. That may not seem like much of a distinction but it is precisely the reason many of these frauds work. In the US the law specifies a maximum hold time on deposits before the bank must make funds available to you. So, as long as the check fails to bounce during that period of time the fraudster usually gets away with their scam. But eventually it does bounce, and that's when the bank comes back to the person who made the deposit and they take their money back - if there isn't enough cash in his account, they sue him for the difference.

I know a guy who was scammed out of an exotic car - the 'buyer' gave him a bogus cashiers check. His bank took nearly three weeks before notifying him that they were "having difficulties" processing the check. By then, the car was half way across the country and had already been resold to a used-car dealer. FWIW, his car insurance eventually paid out because the car was essentially stolen, albeit through fraud rather than the more common ways.

Re:How About ...

[Antique Geekmeister]

He did wait. His bank reported it as valid, and only after that did he send along the $190,000 to his client. Then the first check was bounced, _after_ his bank reported it valid. That's the root of a whole set of fiscal scams going on right now, the fact that banks report checks as "valid" that can still be voided by a malicisious check user after that point.

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 ...

[Registered Coward v2]

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. :)

Except the bank probably only released the funds; they didn't say the check was good. Many US banks will release funds before the check is eventually discovered to be good; people unfortunately think the check is good and that's the root of the scam.

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:Obvious answer...

[putaro]

And so you too would have gotten taken by this scam. They received a cashier's check (aka bank cheque) and their bank accepted it. They, like you, believed that an accepted bank cheque was as good as cash so they wired the refund (which, FYI, is the same as cash, since you can't take it back) and got stuck.

I must be a bad person...

[ibsteve2u]

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

Late news and less salacious

[dpille]

The American Bar Association reported on this mere 17 months ago. I think it's less remarkable that some California firm got bilked as much as they got swindled while ignorant of a direct warning from their prime industry trade journal.

A more compelling version of the scam, to me, is overpayment of retainer fees as a new client. Fortunately, only idiot California firms are vulnerable as the ABA has warned about this variation as well. Interestingly, though, the tab appears to have been $500K in that one.

Re:WTF is "cashier's check" ??

[Compaqt]

A cashier's check is a check issued by a bank.

The party doing the paying is the bank, not you. For this reason, it's considered more secure than a personal check.

If you pay by cashier's check the money has already been debited from your account. There's no possibility that you'll give a check, receive merchandise, and then empty your account before the seller has a chance to deposit the check.

Other names for cashier's check are:
-bank draft
-demand draft
-banker's draft

This scam has been tried on me for years.

[alex_guy_CA]

I'm a wedding photographer. We call this one the pay forwarding scam.

It starts with an email from a potential "client." They say they want to book you from overseas. Offer to send you a check, send a check for more than your fees, and ask you to pay for the invitation printer (or whatever) for them.

On my end, more small potatoes then the case ITA, this scam is easy to spot. The people don't act like a real wedding client, they don't want to talk on the phone, they don't know how to discuss wedding packages, they make have bad grammar etc... You can spot this long before they get to the ask.

For a long time, as soon as I had two or more tale-tale signs, I would quit the conversation. Then I got a PO Box. Now, I drag it on as long as possible (unless I'm extra busy that week). I like to see the look of the fake checks, and I like to waste their time.