Trust Account Traps -Paying Off a Client’s Credit Card Bill

I guess what they say is true: nothing drives blog traffic like warning about trust account scams.

One visitor was my good friend Peter Zuk.  Peter works for the Defender General but has a long history in the title insurance world.  After reading about the latest scam, he reached out to share a cautionary tale.  It’s one he encountered in a previous job, while wearing his title insurance hat.  It bears passing on & keeping in mind.

Peter described it as follows:

“Atty pays off credit cards as part of the closing. Credit card company retains trust account check information and electronically associates it with the credit card. Client charges on the credit card. Pays bill by phone by answering question, ‘Do you want to pay with your checking account’. Client says ‘Sure!’. Funds electronically withdrawn from Atty Trust Account based on last payment made.”

Be wary.  Be careful.

For further information, here are some resources:

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TRUST ACCOUNT SCAM

To: Vermont Lawyers

From: Michael Kennedy, Bar Counsel

Date: April 28, 2015

Re: Latest Trust Account Scam

Please be aware of the latest scam to target lawyer trust accounts. According to the FBI, the scam is nationwide and has resulted in significant losses. I am aware of at least one instance in which a Vermont attorney was targeted.

The scam has at least three variations of the same theme. The facts common to each variation are as follows:

Lawyer represents Seller in a real estate transaction. Lawyer receives an e-mail from Seller instructing Lawyer to wire the proceeds to a particular bank account.

Variation 1: the e-mail appears to be from the Seller but, in fact, the address is off by one letter or character. For example, michael.kennedy@state.vt.us is my actual e-mail address. In this variation of the scam, lawyer receives an e-mail from michel.kennedy@state.vt.us Lawyer doesn’t notice that my first name has been spelled differently and that the e-mail is fraudulent.

Variation 2: same as Variation 1, but the fraudulent e-mail includes language to the effect “if you need to confirm this, please call me at my new number – 802-xxx-xxx.” The number is a different number than Lawyer has on file for Seller. Lawyer calls, gets someone who pretends to be Seller and who confirms the wiring instructions.

Variation 3: the e-mail is from the Seller’s actual account. However, scammers who have monitored the account have hacked into the account and sent a fraudulent e-mail to Lawyer. This happened to a Vermont attorney earlier this month.

Thoughts: 1. In real estate transactions, be wary when dealing with out-of-state sellers.

2. If you call to confirm a wire request, be wary when calling “my new number.”

3. Scams like this are not limited to real estate transactions. It could happen in any case in which you receive money that will be disbursed to a client.