lawyers increasingly targets of fraud check schemes_AFI
                     Lawyers are 
Increas-  ingly 
the Targets of  
Email/Fraudulent  
CLawhyeers carek in cSreacsinhglye remceiveings emails from alleged potential foreign clients looking to collect 
debts from  customers. More likely than not, the email is the first step in a fraudulent scheme 
which involves a deposit and  withdrawal from your special client fund account. A basic 
knowledge of Article 4 of the UCC and simple precautions  can help lawyers avoid becoming a 
victim of these schemes and protect against other potential fraudulent deposits  into lawyer’s 
special accounts, including fraudulent settlement checks and retainer checks.
The scenario is a familiar one by now for many lawyers. There are variations, but it generally 
unfolds something like this:
• A lawyer receives an email from a new potential foreign client looking to collect an 
outstanding debt from a  customer in the lawyer’s jurisdiction.
• The lawyer –  always anxious for new business –  agrees to represent the new client and 
collect the debt.
• Shortly thereafter, the client informs the lawyer that its customer has agreed to voluntarily 
pay the outstanding  debt and that the customer will shortly be forwarding a check to the 
lawyer. The client further asks that the  lawyer deposit the check into his account and, after 
confirming that the check has cleared, wire the funds to the  client after deducting the 
lawyer’s fees.
• Sure enough, a check soon arrives from the customer. The lawyer deposits the check, waits 
for it to clear, and  then wires the money to the client.
• Sounds like a great way to build your practice, right? Think again. Invariably, lawyers who 
respond to these  sorts of email Asotlticoitrantieonyss a Fndir esntg Ianges uinr athnec aebove-described scenario 
are receiving calls from their banwksww.attorneysfirst.com • 727-799-4321
36310 US 19 N., Palm Harbor, Florida 
34684
attorneyprotective.co
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This document should not be construed as legal advice. Because the facts applicable to your situation may vary, or the laws applicable in your jurisdiction may differ, 
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informing them that the checks they deposited in their accounts are counterfeit and 
demanding immediate  reimbursement from the lawyers. And the banks are perfectly 
within their rights to do so!
The mistake most lawyers make is that they assume that once they hear from their bank that 
the deposited  check has “cleared” and the funds are available there is no risk in wiring those 
funds. This is simply not true.  The Expedited Funds Availability Act, 12 U.S.C. 4001, et seq., 
requires banks to disclose when deposited  funds will be made available. However, a bank’s 
making funds available is only provisional until the check is  actually paid by the payor bank 
(i.e., final settlement). UCC § 4-201 provides that prior to final settlement,  the depositor’s 
bank merely acts as the customer’s agent for collection of the check and any advancement of  
funds by the depositor’s bank is provisional. UCC § 4-214 further provides that if there is no 
final settlement
(i.e., the payor bank does not pay the check), the depositor’s bank may charge back the sum of 
any provisional  advancement of funds or demand a refund from the customer.
As applied to our illustration above, this means that the attorney who deposits the check and 
wires the funds to his  “client” once the check clears may ultimately be liable to the bank for the 
amount of the fraudulent check. The bank  may either charge the lawyer’s account if sufficient 
funds are available in the lawyer’s account or demand a refund  and pursue legal action against 
the lawyer for the amount of the check.
Lawyers can take some steps to avoid being victims of these fraudulent check schemes. First, be 
extremely wary of  taking on any representation from a foreign client who contacts you only via 
email. As with any new client, a lawyer  should investigate the client thoroughly. This includes 
determining the actual existence of the client and the validity  of its operations. A diligent lawyer 
should call references for the client, check public records, and obtain supporting  documentation of 
the alleged debt that is owed to the client.
Second, never assume that simply because a check has cleared and funds are available that a 
check has been paid  by a payor bank. Upon receiving a check from a suspicious client, a diligent 
lawyer should call the payor bank to  verify the account and determine if the check is a forgery. A 
lawyer should also not draw on deposited funds from a  suspicious client until he or she receives 
confirmation from the bank that there has been a “final settlement” and the  deposited check has 
actually been paid by the payor bank.
Finally, lawyers should be cognizant that any check they receive may ultimately be dishonored and 
they may be liable  if they draw upon any provisional funds supplied by the depositor bank. Prudent 
practice dictates that attorneys  ensure that they receive “final settlement” on retainer checks from 
clients, and settlement checks froma otptpoorsinge y pparrtoietse acntdiv aett.ocrnoeys, before disbursing funds from 
those checks. m