Again, reconciliation is a good thing! (And a tip to protect against check fraud.)

A few weeks ago I posted Timely Reconciliation Alerts Firm To Trust Account Fraud.

Well, it has happened again.

And, this time, the firm that shared its story also shared a tip to prevent check fraud.

A lawyer called yesterday to discuss a trust account issue.  In the process of a daily reconciliation, the firm noticed an unauthorized ACH disbursement from trust. Someone had accessed the trust account to pay their credit card.  The firm is working with law enforcement to identify the culprit and has confirmed that it was not an employee, client, former client, or anyone to whom the firm delivered funds on behalf of a client.  The most likely explanation is the simplest: someone came across one of the firm’s trust account checks and wrote down or took a picture of the account and routing numbers.  Fortunately, the daily reconciliation alerted the firm to the problem.  The bank refunded the money, and the firm has taken additional steps to safeguard client funds and to protect against check fraud.

Among other things, the firm has moved to a version of “positive pay.” Every day, the bank sends the firm a list of checks that have been presented against the trust account.  The firm approves or disapproves each.  You can read more about “positive pay” in this post from Investopedia.  Note: the firm uses “reverse positive pay.”

Nothing in this post should be read as me stating that the Vermont Rules of Professional Conduct require lawyers and law firms to enroll in a “positive pay” program.  However, it’s worth considering.  As I mentioned in A Lawyer’s Professional Responsibility to Learn to Identify Common Trust Account Scams, if trust funds go missing, the question will be whether the lawyer took reasonable steps to safeguard them.  I could envision a disciplinary prosecutor asking, “did you ever check whether your bank offers a ‘positive pay’ or a similar service?”

Personally, I’d not want my answer to be “a what?”

As always, let’s be careful out there.