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Scams Targeting Attorneys
Lawyers are frequently the subject of cyberscams, phishing and potential fraud. We have some tips for you to avoid being the victim of one of these scammers.
One of the recent scams targeting Arizona lawyers involves an out of state business attempting to complete a transaction with a local business and requesting to send the lawyer a sum of money to be deposited in trust. The lawyer is requested to deduct their fee from the funds and pass on the remainder to a third party.
Tips and Red Flags:
- Check email addresses carefully for correct spelling and domains. Some scammers go so far as to spoof the email of someone you know to introduce the potential client. (eg. Colleague@lawfiirm.com)
- If your potential client is the representative of a business, are they using a business email address or a generic, free email address?
- Don't rely on researching the company or the purported businessperson online. They may choose a real business and a real person's name to use.
- Get a copy of the signing person's driver's license or ensure that their fee agreement is notarized.
- Scammers often insist on quick turnaround time between providing funds to lawyers and requiring distribution, usually less than the period of time for full check clearance. Urgency is the enemy of good judgment.
- Does everything make sense? Is the check coming from the same location as the business? Is it written on a printed business check with the business name?
- Be extra skeptical of cashier's checks.
- Do not pay out funds until the check formally clears the bank.
Ethics Considerations:
- The scam situation might violate Rule 43 on trust accounts, don't put this money into your trust account if it’s not “in connection with the representation.”
- Some iterations of this scam would violate ER 1.7(a)(2) – A lawyer shall not represent a client if the representation involves a concurrent conflict of interest – which exists if (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person, or by a personal interest of the lawyer. Holding funds for a non-client third person until and unless some condition occurs between client and third party - creating a conflict between the client's interest and the third party's interest.
- You might be developing a fiduciary responsibility to a third party that is not your client.
If you think you've been scammed, call the Practice 2.0 helpline to discuss your responsibilities and how to proceed: 602.340.7332
Have you been appointed as an arbitrator for the first time? Worried? Don't know what to do? We've got you covered! This guide will help you get started. Still have questions? Call us at Practice 2.0 and we'll help guide you through what you need to do.
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Practice 2.0 offers virtual 30-minute (free, confidential) consultations! We now offer our 30-minute consultations via Zoom. It's now even easier to get the help and advice you need. Just call us at 602-340-7332 to schedule.
Why might you want to schedule a 30-minute consultations? Are you setting up a new practice? Wanting to implement some new technology? Have more than one or two questions? Then our 30-minute consultations are for you.
Have a quick question? Call us at 602-340-7332 and get an answer.
Membership Fee Statement Q&As
Questions about which boxes to check on your SBA 2024 Membership Fee Statement? Here are some answers to frequently asked questions. But remember, Practice 2.0’s Trust Account Advice Line is here to provide free and confidential advice. Just call us at 602-340-7305.
Q: How do I know if I need a trust account?
A: If you are an active member of the State Bar of Arizona, who practices in Arizona and you hold funds that belong (entirely or in part) to the client or third persons in connection with a legal representation, you may need a trust account. This includes attorneys who take advanced fees and costs, who hold settlement funds, or who hold disputed funds in connection with a legal representation.
Q: Can I have an out of state lawyer manage the trust account in which I deposit funds related to my Arizona client’s Arizona action?
A: Technically, you may engage an out of state lawyer, or a nonlawyer, to assist you in the management of your trust account. As an Arizona attorney, you are responsible for supervising anyone who helps you with the management of your trust account and remember that you are ultimately responsible to ensure that it is managed appropriately. You may not, however, designate an out-of-state attorney as the individual responsible for the ongoing maintenance and supervision of the Arizona trust account on your Membership Fee Statement. An Arizona lawyer must take responsibility for the Arizona client trust account and an Arizona attorney must be listed on the Membership Fee Statement, if you elect to delegate responsibility for the trust account to another lawyer.
Q: Can I keep my funds from an Arizona client with an Arizona case in a trust account in a different state?
A: Maybe, but please call Practice 2.0 before you do so. While Rule 42, ER 1.15 allows you to keep funds in a separate account “maintained in the state where the lawyer’s office is situated, or elsewhere with the consent of the client or third person,” there are other requirements under Arizona’s Rules of Professional Responsibility that apply. The bank you use for your IOLTA account must be an authorized financial institution, and must list the Arizona Foundation’s tax ID number. And, unless you intend to set up a separate, individual trust account for a specific client under Rule 43(f)(1)(B) or be personally responsible for a monthly sub-accounting for the interest earned on a client’s funds in a pooled account under Rule 43(f)(1)(C), it may not be possible for you to do so. Remember that the interest generated by funds in an IOLTA, “shall be paid by the financial institution or investment company to the Foundation.” See R. 43(f)(6). An out-of-state bank may not be willing or able to do so on a regular basis. The best practice is: if you are representing Arizona clients on Arizona cases, and you are holding funds for matters that have not yet been earned, belong to the client or a third party, or are disputed, then even if your multi-state firm has an IOLTA located in another state, and even if it’s at a national bank, you will need an Arizona IOLTA, opened at an Arizona branch of your bank. We are happy to walk you through this process at Practice 2.0’s Trust Account Advice Line – 602.340.7305.
Q: Who should check the box: “I practice in Arizona, or I am eligible to practice in Arizona, but I am not required by Rule 42, ER 1.15, and Rule 43, Ariz. R. Sup. Ct., to maintain an Arizona client trust account.”
A: Not all practicing Arizona attorneys are required to have a trust account. Only those attorneys who hold funds that belong (entirely or in part) to the client or third persons in connection with a legal
representation need a trust account. For example, if you don’t take advanced fees or costs, hold settlement funds, or hold disputed funds in connection with a client’s representation, then you may not be required to have a trust account.
Talk with your managing partner. If you are in private practice, your firm may already have a trust account. If so, your managing partner will be able to direct you to the attorney responsible for the firm’s IOLTA. Depending on your circumstances, you may want to select the fourth box down on your 2024 Membership Fee Statement, which provides: “I am required by Rule 42, ER 1.15 and Rule 43, Ariz. R. Sup. Ct., to maintain an Arizona client trust account, but the Arizona lawyer listed below is responsible for the ongoing maintenance and supervision of the Arizona client trust account into which my client funds are deposited.”
Q: Who should check the box: “I am admitted in Arizona and practice in another jurisdiction. I am not required by Rule 42, ER 1.15, and Rule 43, Ariz. R. Sup. Ct., to maintain an Arizona client trust account.”
A: If you are admitted in Arizona, but practice only in another jurisdiction and you do not hold funds that belong (entirely or in part) to an Arizona client or third persons in connection with an Arizona legal representation, you likely do not need an Arizona trust account.
Q: Who should check the box: “I am on inactive, retired, or judicial status with the State Bar of Arizona, and I am not required by Rule 42, ER 1.15, and Rul 43, Ariz. R. Sup. Ct., to maintain an Arizona client trust account.”
A: “Inactive”, “retired”, and “judicial members” are defined in Ariz. R. Sup. Ct., Rule 32(c)(5), (6) and (7) respectively. If you fall into one of these categories, you likely are not required to maintain a client trust account. Please note that effective January 1, 2024, ER 1.15(g) permits lawyers who serve as third-party neutrals to hold advanced funds related to that service in trust accounts.
Q: Who should check the box: “I am required by Rule 42, ER 1.15 and Rule 43, Ariz. R. Sup. Ct., to maintain an Arizona client trust account, but the Arizona lawyer listed below is responsible for the ongoing maintenance and supervision of the Arizona client trust account into which my client funds are deposited.”
A: If you hold funds that belong (entirely or in part) to the client or third persons in connection with a legal representation, you need a trust account. This includes people who take advanced fees, advanced costs, and/or who hold settlement funds or disputed funds in connection with the legal representation. Although each attorney is still responsible for the trust account management of his or her client’s funds, you are permitted to designate another Arizona attorney as responsible for the maintenance and supervision of the trust account into which your client funds are deposited. If you do this, however, please take some time and talk with the person who you are designating as responsible for the trust account as you are adopting their answers and may still be responsible if the IOLTA is mismanaged. You should know what steps the designated person takes to maintain compliance with the applicable rules.
Q: I am an active Arizona attorney and I need a trust account. Which box should I check?
A: Go to the section headed: “PLEASE COMPLETE THE BANK SECTION BELOW IF YOU ARE REQUIRED OR STILL RESPONSIBLE FOR AN IOLTA OR INDIVIDUAL TRUST ACCOUNT”. Under that, select the box that
reads: “I am required by Rule 42, ER 1.15, and Rule 43, Ariz. R. Sup. Ct., to maintain an Arizona client trust account.” You should be prompted to list the account information.
Q: I am admitted in Arizona and practice in another jurisdiction, but I need an Arizona trust account. Which box should I check?
A: Go to the section headed: “PLEASE COMPLETE THE BANK SECTION BELOW IF YOU ARE REQUIRED OR STILL RESPONSIBLE FOR AN IOLTA OR INDIVIDUAL TRUST ACCOUNT”. Under that, select the box that reads: “I am admitted in Arizona but practice in another jurisdiction. However, I am required by Rule 42, ER 1.15, and Rule 43, Ariz. R. Sup. Ct., to maintain an Arizona client trust account.” You should be prompted to list the account information.
Please call us at 602.340.7305 with any additional questions.
Guidance on electronic funds transfers and trust accounts
Can you use Zelle, or Venmo, or other forms of electronic funds transfers? Read the latest guidance here.
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Remote Online Notarization - effective April 10, 2020
The Governor has accelerated the effective date for remote online notarization. You may find the Executive Order here.