Pub. 14 2019-2020 Issue 4

NEBRASKA BANKERS ASSOCIATION 27 For more information, contact Bob Kardell, JD, MBA, CISSP, CPA, CFE, CFF, attorney at Baird Holm LLP, (402) 334-0500 or bkardell@bairdholm.com . Bob is a member of the Technology and Intellectual Property Section of Baird Holm, LLP, specializing in cybersecurity and breach response. Bob is also a retired FBI Special Agent with over 27 years of fraud and investigative experience. require the letter of credit. They will offer to send the money in the form of a cashier's check for deposit into the firm's trust account, and they will offer to let the firm hold the money while the letter is outstanding. Unfortunately, the accomplice, the company, and the need for the letter of credit are all a pretense to have a counterfeit check deposited in a legitimate account. If the target of the scam agrees to hold the money and issue a letter of credit, the money will come in the form of a coun- terfeit check to be deposited into an account. The counterfeit check may be for $30,000, $3,000,000, or $30,000,000, while the letter may only be required for a smaller amount. The ac- complice will offer to let the target keep the amount equal to the letter of credit, plus a holding fee, but then will request a return of the excess to the requestor, usually via a wire trans- fer. The check will eventually bounce, and the target will be saddled with a substantial debt if the outgoing wire transfer is processed. The entire scam is just a new twist on an old scheme, but the fraudsters have created a very elaborate scheme. The scheme can be perpetrated with counterfeit bills of lading, invoices, orders, and even counterfeit filings froma secretary of state. The scheme is so elaborate it has created issues for a number of firms who elected to deposit the check. There are variations of the scheme which involve individu- als being recruited to "invest" in a letter of credit to allow trade between the accomplice and other countries. The individuals may be asked to provide investment money or to hold the money and issue a letter of credit themselves. I have worked on a case involving a very similar scam in which the target was an attorney. The attorney was convinced that because they were allowed to "hold" the money plus fees, there would not be a financial risk. Unfortunately, the attorney did not understand how the scheme worked, and they eventu- ally transferred over $200,000 via a wire transfer to China. Additionally, the bank that processed the transaction was left to recognize a loss because the attorney did not have enough money in the account to cover the loss. There are a number of red flags which would stand out to a seasoned investigator, such as the letter of credit from an organization rather than a bank, offering to let the person hold the money plus a transaction fee, asking for the excess money to be refunded, or asking for individuals to "invest" in a letter of credit. But, by design, the red flags for these transactions all take place outside of the banking environment, which makes it difficult for the banking staff to detect. In fact, by the time the bank becomes aware of the transaction, the target may have already transferred the money. The initial contacts, the check, and the fictitious documents that may be easily spot- ted by a bank are directed to someone at the target firm. The explanation of the transaction would cause most bankers to immediately think of an advanced fee scheme, but many lawyers and financial professionals have not been trained to identify this scheme. 