Businesses Should Beware of Check Scams

A surge of fraudulent activity directed at attorneys and title companies has been occurring across the country, including Tennessee. This hits close to home for me because many of my clients are law firms and lawyers. However, fraudsters are branching out and starting to tailor their scams to other types of businesses.

This means everyone should be on alert for check scams. Some typical scenarios are:

• A foreign real estate investor claims to be purchasing a piece of property. The perpetrator contacts a local real estate agent who sends the check to the title company/law firm for escrow. The check will be a large down payment or the full amount. The deal “falls through” and the firm is asked to wire funds back.
• Someone posing as an out-of-state attorney sends a referral to a law firm to collect a debt from a local corporation. Soon after the demand letter is sent, the firm receives a cashier’s check representing payment received for the debt. After depositing the money into its client trust account, the firm is asked to wire the funds to client less its fees and costs.
• A potential client sends a cashier check as payment for a retainer agreement. It is for a larger amount than agreed. The client requests the firm wire transfer a refund for the overpayment.

Whatever the specifics, there’s a basic theme for these types of scams that can hit any type of business:

• An apparently legitimate transaction
• Arrival of the large bank or cashier’s check to satisfy the transaction
• Immediate and repeated requests by the “client” to wire out funds

Once the funds are wired, they are quickly transferred to another account (often offshore) and generally cannot be retrieved.

Besides knowing what types of scams are common, here are ways to spot red flags and prevent yourself from becoming a victim:

• Know your client. Scams typically involve a corporation or person who is not local. If you are dealing with someone who is unknown to your firm and the situation is out of the ordinary, be suspicious.
• Always wait for bank verification that the deposited funds have been collected from the check issuer’s account. Just because funds are available does not mean the check has cleared. If you are concerned about any check, please bring it to Pinnacle for us to research.
• Don’t call the number on the check to verify funds. The scam artist could be on the other end of the line. Research the bank’s contact information independently.
• Proceed cautiously if a client you are not familiar with insists that you wire back funds. Don’t let them rush you—the crooks know there is only a limited amount of time between depositing a bogus transaction and getting access to the funds before any alert or notice is received.
• Make sure everyone in your office is aware of these scams and how to spot red flags. If you rely on your accounting department to catch a fraud, it may be too late.

One of the most important things you can do is to pay attention to your gut feelings. If you have a bad feeling about a transaction, take precautions and work with your bank to verify the information. Taking the time to spot these indicators will help prevent you from falling for a check fraud scheme.

Listen to the podcast below for more information about how to protect yourself.

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