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Chioma Ufodike

Law societies caution against fraud amid pandemic

Tuesday, May 26, 2020 @ 9:34 AM | By Donalee Moulton

When the times get tough, fraud can escalate. That certainly seems to be the case for lawyers and their firms in the present-day COVID-19 environment.

“Fraudsters seek to take advantage of the confusion and anxiety created by disruptive events like the current pandemic. Over the past several weeks, we have heard reports that would indicate there has been an increase in the frequency of e-mail phishing and fraud attempts,” said Vinnie Yuen, spokesperson for the Law Society of British Columbia in Vancouver.

In particular, she noted, fraudsters are sending COVID-19-related e-mails impersonating a colleague or client to trick recipients into installing malicious software by opening an attachment or clicking a link. Fraudsters have also drawn from bank accounts using counterfeit cheques.

Two key factors help explain why the current landscape creates an increased risk of fraud, both from employees and from lawyers themselves: pressure and perceived opportunity. Financial difficulties, from family job losses to reduced revenues, can create pressure when money is required to meet obligations, said Kate Shewan, director of finance with the Nova Scotia Barristers’ Society (NSBS) in Halifax. 

“Perceived opportunity is the belief that fraud could be carried out without detection,” she added. “This can increase if a person sees organizational changes that may have weakened internal controls or there is little oversight.”

Chioma Ufodike, manager of trust safety with the Law Society of Alberta

Those are two of the missteps lawyers and firms often make that inadvertently open the door to fraud. Another serious mistake is giving one employee too much responsibility. “If the same staff member is responsible for handling all aspects of the bookkeeping, it will be very easy to perpetuate and conceal the theft. This is made worse when the firm does not have mandatory vacations, periodic rotations or transfers of tasks between key employees,” said Chioma Ufodike, manager of trust safety with the Law Society of Alberta in Calgary. “It is easier to detect theft if multiple employees review accounts and are responsible for different functions.”

Lack of oversight by the responsible lawyer is often another major problem, she noted. “In some cases, a very simple review of bank statements and cancelled cheques by the lawyer would catch the theft. For example, the law society has seen instances where trusted employees have forged the lawyer’s signature and written multiple cheques to themselves.”

There are prudent steps lawyers and firms can take to decrease the likelihood of fraud even as fraudsters look for opportunities presented by the response to COVID-19. Perhaps topping the list is avoiding the urge to open a link or attachment in an e-mail or text message from anyone you do not know. “If [lawyers] receive a link or attachment that they were not expecting – even if it is from someone you know – they should call the sender at the telephone number they have on file, not the number listed in the message, to confirm the message is legitimate,” said Yuen.

Shewan recommends that lawyers review and analyze how changes in processes and procedures have impacted their internal control systems. “If necessary, additional alternative controls should be implemented to offset any weaknesses that have occurred. For example, if staff are away from the office and there is less segregation of duties, additional oversight of employees and financial transactions may be required.”

Ufodike also suggests that firms follow the money by performing audits to ensure transactions make sense and pay close attention to documents and the supporting paperwork. “Remember that good documentation does not mean something happened, only that someone said it happened.”

Law societies across the country are helping lawyers and firms navigating the new landscape presented by the global pandemic. The Law Society of British Columbia, for example, has increased its communications to the profession by sending out information that can assist them with their COVID-19 response, including fraud alerts. It also has a webpage dedicated to preventing fraud.

On the other side of the country, NSBS posted FAQS on its website that provide guidance to members during the pandemic related to managing trust accounts, verifying the identity of a client remotely and more. “Our trust accounts and legal services support teams are also available to our members for support and questions,” said Shewan.