By: John Bosco, Brian C. Pascale, and Andrew L. Weitz
on behalf of the Technology Committee
Be Concerned, Credible Threats to
your Firm’s Bank Accounts Exist
As lawyers, we typically hold a realistic view
of the world. So, it should come as no surprise
when we tell you that the threats to your bank
accounts are real. Several Academy members
have recently been the victims of such
fraudulent activity.
In one instance a “leech” attached himself to
their business account so that he could use it to
pay his monthly Con-Ed bill. The firm’s
accountants initially missed the fraudulent
activity because the recurring charge was not
large enough to raise a red flag. Thieves will
often make a small initial charge as a trial
balloon to see if their mark will catch it.
Another factor that delayed identification of
the fraudulent activity was that the firm’s
legitimate transactions camouflaged them.
LESSONS LEARNED
Get High Security Checks
Reconcile Accounts Daily
Avoid Electronic Payments
Below are some of the many tools available to
prevent this crime from happening to your
firm. The list is by no means exhaustive.
ORDER HIGH SECURITY CHECKS
Spend a little more money and get high
Stop Payment on Lost Checks
Form Banking Relationships
security checks. Like the precautions that the
U.S. government has embedded into our
currency to prevent counterfeiting, features of
high security checks do the same. The leech who was stealing from one Academy
member opened a bank account in a neighboring county. He would then present his
bank with counterfeit checks with the firm’s routing and account number. No special
paper was needed because the mark used checks without the additional security
features.
Features of high security checks include high-resolution borders, complex color
patterns, foil holograms, and watermarks to make them difficult to forge. Another
feature known as void verification prints the word “VOID” repeatedly over the check
when it is copied. False positive testing areas allow a check’s authenticity to be
validated with a black light pen. Another security feature these checks often have is
heat detection. This is done through a process called toner adhesion which uses heat to
bind the toner to the check. This makes duplication more noticeable.
An example of a check with the aforementioned high security features available from
Harland Clarke can be found on their website. www.harlandclarke.com
DAILY RECONCILIATION
Another method which may seem tedious may just save your firm from financial ruin.
It requires that you look online to see what transactions have been presented for
payment and perform a daily reconciliation of your accounts. If banking online is not
your speed have your bank to fax or email to you in the morning a list of checks that
have been presented. Have a partner of the firm personally make sure the transactions
coincide with the checks you have issued. Don’t leave this to your bookkeeper for they
may be the thief.
SHUT DOWN ELECTRONIC BILL PAYMENTS
Online banking and payments have become the norm in today’s world. You will see
them on your bank statement as an “ACH” transaction. ACH, which stands for
Automated Clearing House, is a network for electronic financial transactions the U.S.
Don’t worry if you see one on your statement, in all likelihood they are legitimate.
Common ACH transactions include direct deposits, payroll, payments of insurance
premiums, loans and many other normal bills. They can also be a leech’s dream come
true. These are the types of additional transactions that muddy up a bank account
statement and allow fraudulent transactions to hide in plain sight. Bottom line, if you
are going to sacrifice financial security for convenience you must be prepared to closely
look at all bank statements.
BE WARY OF REQUESTS TO REISSUE CHECKS
We all know checks can now be deposited by taking a picture of it with a smart phone.
As such, while we all want our clients to end their relationship with us satisfied, you
also must be wary of one who asks you to reissue a settlement check. First and
foremost, you must make sure that the check has not already been deposited. You then
must immediately stop payment on the previously issued draft. Even with these
precautions in mind, you should still wait before reissuing payment to ensure that the
original check has not been presented elsewhere. You can ask you bank for the
appropriate time frame. When it comes to IOLA, failing to do your due diligence can
not only risk the funds in your account but your ability to make more in the future.
ESTABLISH A RELATIONSHIP WITH YOUR BANK
Last, find bankers who are willing to work with you. Personalized service is a must.
Speak with them when making your deposits, what may seem a simple conversation
may reveal unauthorized transactions on your account. Further, when there is
fraudulent activity it will make obtaining the necessary transaction documents that
much easier.
These are only a few suggestions to stop the thieves who want to drain your bank
accounts. The threats are real. Take precautions before you become a victim. We have
enough headaches in our daily lives as lawyers. We do not need to be swindled by
leeches.
As an aside, when one Academy member spoke with their bank’s anti-fraud unit they
were told that as law enforcement was closing in the fraudster themselves contacted the
police to reported that their bank account had been hijacked by criminals who were
shockingly depositing funds into his account. I guess he was the “victim” of a modernday Robin Hood. You can’t make this stuff up.