Mar 10, 2010

Check Kiting Scam Hits Korea (Beware)

I was contacted by an attorney needing assistance in placing a block, via injunction, on a Korean bank account. The attorney was the victim of a check kiting scam targeting attorney trust accounts.

A number of these scams have been running through Missouri. 

My firm's case involves an attorney's trust account, in which a “client” claiming to be from Malaysia contacted the attorney and asked for assistance in having insurance funds transferred from a North American insurance company to a foreign bank. The fraudster claimed he was injured in an auto accident involving a Missouri-based trucking company. The trucking company paid the settlement, but the fraudster needs the assistance of an attorney to have the funds transferred overseas, since the insurance company is unable or unwilling to forward payments out of North America.

The fraudster sent a copy of his Malaysian passport, utilized the name of a real Missouri trucking company, a real insurance company based in Canada, signed a retainer with the firm and sent a letter claiming to be an adjustor from that company.  He even had a person pose as an agent from the insurance company.

The local bank received the check and wire transfer instructions to a person in Korea. The attorney’s bank, before presenting the check to the bank the check was drawn on, forwarded the funds to a bank in Korea. The majority of the funds were in the attorney’s trust account and part of the funds were part of the attorney’s overdraft protect.  The amount of the money forwarded was USD 350,000.

I was contacted in the wee hours of the night and we contacted the Korean bank and firmly requested them to place a temporary hold on the funds and also filed an injunction, since the beneficiary of the funds has strongly petitioned the bank to release the funds and thus not return the funds to the forwarding bank.
Our client is not the only attorney that was the victim or target of the scam. According to an article in this week's Missouri Lawyers Weekly, at least 12 attorneys in that state have fallen or nearly fallen for this scam. Once an attorney agrees to handle the case, the fraudster sends a counterfeit check for the fake settlement amount and the attorney initiates a wire transfer request.

A simpler but equally devious scam has recently been sweeping attorneys' trust accounts in Hawaii.

In this scam, a “client” claims to be an American woman seeking a divorce while living overseas. When an attorney accepts the “case,” the fraudster sends a counterfeit check to pay the retainer fee, but for an amount exceeding the fee. If the attorney's fee is say $10,000, the fraudster sends a counterfeit check for $100,000. The attorney then contacts the “client” and explains that she has made a mistake. The fraudster requests the attorney to send her a check for the difference. The attorney learns they have been scammed only when their bank tells them the original check was counterfeit.

It seems odd to target attorneys, however, they often keep client funds in trust accounts and have access to large overdraft protection on accounts.

Attorneys may be more susceptible, since attorneys often delegate much of the “clerical” work to secretaries, often juggle multiple matters at the same time, and are notoriously more careful with client matters than their own matters.

If you are contacted via e-mail, phone or through a dream – confirm everything, never forward funds until a check is confirmed cleared by the bank the check was drawn on and don't believe anyone.

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SeanHayes@ipglegal.com