Phony business loan ruse

The ruse

This was the ruse used when the bad cheque scam first surfaced in Ontario. 

Here is the description of the scam as first reported:

To date, the lawyers in Ontario who have been targeted have been sole practitioners and lawyers in small firms. These new scams involve commercial loan transactions such as small business equipment or inventory purchases. The lawyer is retained to act for both the lender and borrower to obtain appropriate security for the loan.

The deals look legitimate, and typically the client is in a hurry and is new to the firm. Typically the lawyer receives and deposits the certified cheque that funds the transaction. He or she then draws certified cheques as the borrower has directed. Several days later the lawyer is advised that the certified cheque from the lender is bogus and there is a shortfall in his trust account.

Fraud alert – counterfeit certified cheques (Notice to the Profession, January 22, 2008).

Twists and developments

Since first reported, we have seen new twists to the phony business loan and other ruses as fraudsters try to trick lawyers. Because the details of any particular ruse or scam may change and any variation in one may be used in another, lawyers will want to be familiar with all of these twists and developments, including one that relates specifically to the business loan context:

For a complete list of publications relating to the phony business loan ruse, see Bad cheque scam publications.

Learn more about how to protect yourself from the bad cheque scam.

The ruses

The fraudsters generally use a particular ruse to trick lawyers. Here are the details of the different ruses reported by the Law Society:

Phony debt collection ruse (includes collecting on outstanding loans, commercial debts and settlement agreements)

Phony debt collection in the matrimonial context ruse

Phony business loan ruse

Phony real estate conveyance or fake mortgage ruse

Retainer overpayment and refund ruse