Collaborative Law Agreement Scams
The Society is aware that many law practices have been the target of attempted scams along the following lines:
- the law practice receives a “cold” contact via email seeking assistance in the recovery of the balance of settlement funds pursuant to a collaborative law agreement
- the claimant lives overseas and is seeking assistance in the recovery from an ex husband “who resides in your jurisdiction”
- the law practice may actually receive a copy of the collaborative law agreement, copies of the claimant’s passport and other documents of identification
- the amount claimed is a significant amount, $500,000.00 to $950,000.00
- before the law practice has commenced any action, an email is received from the “client” stating the husband has agreed to make a payment
- a bank cheque is then received by the law practice. These cheques were originally purporting to have been drawn on foreign banks but in recent times the cheques have been purporting to have been drawn on Australian banks
- the scammer expects the law practice to bank the cheque to its trust account.
- the scammer then makes a claim on the law practice for part of the funds, before the cheque becomes cleared funds in the law practice’s trust account.
Law practices are reminded that:
- they should ensure that they do not disburse any money from their trust account unless they are satisfied that they hold cleared funds in their trust account.
- a bank cheque is not cleared funds.
- the best practice for banking a cheque drawn on a foreign bank is to bank it on a collection basis – when a cheque is banked on a collection basis the cheque is not credited to the bank account until the cheque has been paid by the issuing bank. The proceeds of the cheque can then be disbursed.
- information concerning whether Australian bank cheques have been reported as lost or stolen can be obtained directly from financial institutions – contact details can be obtained from apca.com.au.
The recent experience of a Queensland law practice serves as a stark reminder of the importance of banking, on a collection basis, cheques drawn on foreign banks.
The law practice received a cheque for USD$98,000.00 purportedly drawn on a foreign bank. The cheque was banked in the normal way.
Four (4) days later, the law practice’s trust account banker recorded in the bank statement that the proceeds of the cheque had been cleared.
Sixteen (16) days after the proceeds of the cheque were recorded as having been cleared, the law practice made a payment against these “cleared funds”.
Two (2) days after the payment was made, the law practice was notified by the trust account banker that the cheque had been dishonoured.