So, October marks the 4th year Kingston Data and Credit
has been in existence, and in that time we’ve had no less than five attempts to
defraud us through fraudulent payments to our trust account. The most recent involved a cheque for over
$200,000. We’ve become aware of what to
look for, but looking online, many collection agencies and lawyers have fallen
victim to this scheme. It’s fairly
predictable, and we can walk you through some preventative steps.
The Big File Rolls In
Suddenly, out of the blue, you receive a call, email, or
most recently, Linkedin messages asking if you can represent them – these can
come from China, India, or most recently in our case, Europe. The request is to represent a company on a
very large account, and they will provide documentation or even a collection
agreement – while some of these requests might be legitimate, you need to
protect your agency or law firm. There
are a few things to watch for and investigate when taking on these accounts.
=> Is the company legitimate? If you are receiving an email from a CEO of a
multinational company, and the email is coming from gmail.com, ymail.com, or
even outlook.com, odds are it’s not authentic.
The most recent request we got was from a proper company domain … that
on the surface passes the first step. We
go to the website, and everything looks legitimate, however a big red flag there
is no phone number to contact the company, so it could be a ‘dummy site’
=> WHOIS is a domain search function on the
internet – if you google “WHOIS abcompany.com” you will get a number of sites
that pull up domain registry information.
In the case of the latest fraud attempt, it has an accurate address for
the registrant, but the domain was only created in March of 2015 … and the
agreement or contract provided is from 2013.
That’s the second red flag for fraud.
=> Expanding to a general Google search, there are
a number of pages saying the company is 30+ years old and dissolved, others say
it’s open and current – but none of them list contact information that we can
call the company independently from the number provided to us. Furthermore, the ‘new client’ contact doesn’t
show up on Linkedin.
Money For Nothing
So while our suspicions are up, there’s no reason to not
represent the company at this point (unless you are a lawyer with
identification requirements through the law society) – however, we get the file
listed in our office by email, and before we can even mail out a collection
letter, we hear from the debtor! They
are paying $205,000 out of the $600,000 account listed, and the cheque is on
it’s way – a little odd? Not completely
out of the question, but beyond suspicious.
And then the cheque magically arrives, and it’s not from the
debtor company! It’s from a completely
different company in a different province.
A little independent detective work finds us the cheque company phone
number, and after a quick call to their AP department, they confirm it’s not a
cheque issued from their company, and they thank us for bringing it to their
attention, and they notify their bank.
Meanwhile, Someone
Wants Their Funds
The original ‘creditor’ is now jumping up and down asking
when the cheque will clear and when we can do an international wire to Europe
to send them their funds, less our commission fee. Of course they want it as quickly as
possible, because 30 days from now, the cheque would be returned insufficient
funds, fraudulent, account frozen, or some other reason, and we’d be out the
$205,000, with no chance of recovering our money.
Steps To Take
First of all, never disburse funds from trust earlier than
required, and certainly if there is a good expectation that the funds will not
clear. Some provinces and states have
deadlines for issuing funds within 45 days, or by the 20th day of
the following month, but if there is a concern for fraud, don’t do anything
other than a trust cheque – international wire transfers are not cancellable!
Next, always verify your client is legitimate, the cheque is
legitimate, and that you are not party to money laundering or fraud – always independently
corroborate that everything is on the up-and-up. Don’t call the phone number on the cheque,
Google it and call independently.
Lastly, if there is fraud, report it. Report it to the company that is the victim
of someone sending out fraudulent cheques in their name, because their security
has probably been compromised. Report it
to your bank so they can take steps to protect their customers, and report it
to the RCMP (if you are in Canada) because it’s required by law.
They Are Getting
Smarter
While the example above is the typical scenario, there are
variants and evolutions of the trust scam constantly happening – now we receive
Linkedin connection requests from ‘potential clients’ with fully fleshed out
profiles, and the ‘creditors’ or ‘debtors’ have local numbers and websites forwarded
to whatever location they are operating from.
These attempts at fraud are becoming more sophisticated, but all in all
they have two key qualities – they are too good to be true, and they are in a
rush for you to send them money.
Alert Websites and
Useful Links
There are a lot of useful links below to keep an eye on
trust fraud schemes – some list actual occurences.
Conclusion
While collection agencies and law firms are in the business
of collecting funds in trust and disbursing them to creditors, due diligence
and vigilance is always required. Many
of these scams could cripple or close a reputable business and these attacks
are not uncommon. We see these attempts
to defraud our company every six months
or so, and the news is filled with stories of law firms issuing funds that
never existed. Be careful, be cautious,
and be professional.
If you have any examples of fraud attempts against your
company, I’d invite you to post them in the blog comments, to help protect
agencies and firms in your area.
Thanks kindly,
Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
Brantford, Ontario
226-946-1730
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