Fraud against and relating to lawyers is a serious concern and is on the rise.  Lenders, insurers, law societies, and lawyers themselves all suffer.  Fraud can occur in every type of practice, but all too often, sole practitioners or those who may be struggling in their practice are the targets of the fraudsters. This is often because lawyers who are isolated or who have financial needs may be more vulnerable.

You may believe that you could never fall victim to a con, but know that the scams are often very sophisticated and that it can be very difficult to establish that a matter is not legitimate.  Fraudulent files may involve any type of law, including litigation, IP, business and family law.  The potential “clients” are becoming increasingly convincing and sophisticated and will often be able to provide you documents that support the scam that look authentic and very credible. 

 

If you have even the slightest suspicion that a matter is not legitimate, proceed with extreme caution.  Look for red flags, ask questions, and dig deeper.  The best advice if you suspect that a matter is not legitimate is to walk away.  If it looks too easy or too good to be true, it probably is.

 

However, if you discover that you have fallen victim to a fraudulent matter, the Law Society encourages you to contact a colleague or a lawyer at the Law Society.  You may feel that you are in a situation that you feel ill prepared or unable to manage. Although client confidentiality is always a concern, in most cases you will be able to find a way to discuss the scenario without revealing the client's identity.

 

If you have taken things too far before realizing that you have been fooled, you may have to retain your own counsel to discuss the matter fully in confidence. But do so, no matter how compromised you may feel. To continue to co-operate with a fraud artist out of fear of exposure or reprisal will come to no good end. A fraud left unchecked can lead to disciplinary action by the Law Society, denial of professional liability insurance coverage, personal financial ruin, and in some cases criminal law sanction.

 

According to rule 3.2-7 of the Law Society of New Brunswick Code of Professional Conduct (hereinafter, the “Code of Conduct”): 

 

 

 

The Commentary to that rule provides that a lawyer has a duty to be on guard against becoming the tool or dupe of an unscrupulous client or of persons associated with such a client.  A lawyer should make reasonable inquiries to obtain information about the client and about the subject matter before accepting a retainer if a lawyer has suspicions or doubts about whether he or she might be assisting a client in dishonesty, fraud, crime or any other illegal conduct.  The lawyer also has a duty to make reasonable inquiries if suspicions arise during the course of the retainer. 

 

For example, you should ask questions and satisfy yourself that a matter is legitimate in the following situations:

 

This is not meant to be an exhaustive list and the types of frauds that can affect lawyers are too numerous to mention in detail.  The following pages outline some of the most commonly recognized categories of frauds, and may give you some tips on recognizing fraudulent clients and managing the risks.

 

Review the Law Society of New Brunswick website section on Fraud Alerts, as well as those of other jurisdictions.  This will help you keep current on known fraudulent activity that may affect your practice. These sites describe various fraudulent schemes in the areas of real estate, investment, bad cheques and family law that have affected lawyers.  Also, consult the Law Society of New Brunswick website section on Loss Prevention Tips for practical tips on recognizing and avoiding fraud.