As technology advances and the legal profession increasingly moves online, scams targeting lawyers have become more sophisticated. One common scam involves fraudulent inquiries about drafting sales and purchase agreements. This blog will explore how these scams operate, provide real-world examples, and outline ways to safeguard against them. While there is focus for attorneys this type of scam could be targeted to any businessowner.

The Anatomy of the Sales and Purchase Agreement Scam

These scams often follow a predictable pattern:

1. Initial Contact: A scammer posing as a prospective client reaches out via email or phone, claiming they need legal assistance drafting a sales and purchase agreement.
• Example: An email might read, “Do you draft sales and purchase agreements for transaction matters? Kindly advise on your availability.”

2. Urgency: The "client" often expresses urgency, pushing the lawyer to act quickly and bypass normal due diligence processes.

3. Fake or Overpayment: The scammer may send a fraudulent check for an excessive amount, asking the lawyer to refund the overpayment. Alternatively, they might seek sensitive information.

4. Fake Documents: In some cases, the scammer provides forged or unverifiable documents to support their claims.

5. Loss or Liability: If the lawyer falls for the scam, they may suffer financial losses, reputational damage, or even legal liabilities.

Real-World Examples

While specific names are often omitted for privacy reasons, several cases have been publicized by bar associations:

1. The Overpayment Scheme: A Canadian lawyer received a request to draft a sales agreement. After receiving a check for $200,000, the lawyer was asked to refund $50,000 before the check cleared. The check later bounced, leaving the lawyer out $50,000.
• Source: Law Society of Ontario

2. Identity Theft: In Texas, a lawyer was targeted by a scammer impersonating a legitimate client, resulting in the release of sensitive data. The Texas Bar Association issued a warning to its members about this tactic.

Recognizing Red Flags

To avoid falling victim to these scams, watch out for the following warning signs:

1. Generic or Vague Inquiries: Emails or messages that lack specific details about the transaction or parties involved.

2. Pressure to Act Quickly: Scammers often create a sense of urgency to prevent you from conducting due diligence.

3. Unusual Payment Methods: Requests for refunds from overpayments or payments made via unconventional methods.

4. Inconsistent Details: Contradictions in the documents or the "client's" story.

5. International Requests: Clients from foreign countries with unverifiable identities or questionable credentials.

Safeguarding Against Scams

Here are some strategies to protect yourself and your practice:

1. Verify Client Identity

• Request detailed contact information, identification, and credentials.
• Use reliable sources to verify the client's identity and legitimacy.

2. Insist on Due Diligence

• Conduct thorough checks on all parties and transactions.
• Verify the authenticity of documents provided.
• Use background search services for both the individual and they company.

3. Implement Secure Payment Policies

• Accept payments only through verified and secure methods.
• Wait for checks to clear fully before issuing refunds or taking further action.

4. Maintain Clear Communication

• Avoid rushing into agreements without a signed engagement letter.
• Clearly outline your firm's procedures for client onboarding.

5. Stay Informed

• Monitor alerts and warnings issued by bar associations and legal organizations.
• Share experiences with colleagues to increase awareness.

Illustrative Scenario

Let's consider a hypothetical scenario:

A lawyer receives an email from "Joe Crook," who claims to represent a foreign corporation seeking assistance with a multi-million-dollar real estate transaction. Joe sends a well-written email and attaches convincing but forged documents. After agreeing to proceed, the lawyer receives a check for $500,000, purportedly from the buyer. Joe then requests the lawyer wire $50,000 to a third party for "administrative fees." The lawyer, acting in good faith, sends the funds before the check clears, only to later discover the check was fraudulent.

Actions to Take If Targeted

If you suspect a scam:

1. Cease Communication: Stop engaging with the individual immediately.

2. Report the Incident: Notify your bar association or local authorities. For U.S. lawyers, the FBI's Internet Crime Complaint Center (IC3) is a valuable resource.

3. Warn Others: Share your experience with colleagues and professional networks to prevent similar scams.

4. Review Your Procedures: Conduct a post-incident analysis to identify vulnerabilities and improve your firm's protocols.

Resources and Notices

State bar associations frequently issue alerts about scams targeting lawyers. For example:

• The California State Bar regularly updates its website with scam warnings and prevention tips.

• The American Bar Association (ABA) has resources on its website to help lawyers recognize and avoid scams.

• The Texas Bar Association's warning about identity theft scams targeting lawyers emphasizes the importance of verifying client credentials.

Final Thoughts

Scams targeting lawyers are becoming increasingly sophisticated, particularly those involving sales and purchase agreements. By staying vigilant, conducting proper due diligence, and adhering to secure practices, you can protect yourself and your practice. Remember, no matter how convincing a potential client may seem, taking the time to verify their claims is always worth it.

If you've encountered a suspicious inquiry or want to learn more about safeguarding your practice, consider reaching out to your local bar association or visiting trusted legal resources online. Together, the legal community can build resilience against these evolving threats.