wmlro.com: why lawyers need to do effective KYC
It's like banging one's head against a brick wall, trying to get lawyers to understand the benefits of doing effective due diligence on new clients. But a series of cases in the USA in recent weeks might, at last, make them pay attention.
There's an old scam - it's been doing the rounds for ages where a fraudster sends someone an overseas cheque, asks them to bank it, wait a few days for clearance and then draw against it, sending the money to somewhere it's difficult to recover it from - and in any case a place where it will be removed from by the fraudster at the first opportunity.
The scam relies on the fact that the victim knows nothing of "recourse banking" in which the amount of the foreign cheque is credited to the account after, say, five days - but the bank reserves the right to reclaim those moneys if the cheque bounces.
And it does.
Incredibly, several US law firms have fallen victim to the same scam, albeit dressed up in a slightly different way.
An unsolicited letter arrives saying that a client needs representation to recover a debt from a person in the USA. The letter includes an agreement to act and - here's the clue - a cheque from the debtor. The law firm is asked to bank the cheque, deduct the fee specified in the agreement to act and forward the balance to the "client."
The cheque will be either dud or fake: neither of which will be known to the law firm for, perhaps, two or three weeks as out-of-state cheques regularly take that long - or longer - to clear.
But the law firm's bank will have credited the money, on recourse.
Then the cheque bounces or turns out to be counterfeit. The law firm has to make good the loss - and suffer the amount it has wired to Canada, China, Korea or Ireland - the current favourites for this scam.
The Federal Deposit Insurance Corporation has so far this year warned of counterfeit cheques or money orders circulating in the name of eight banks.
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