CBA Record January-February 2024

cashier’s check (i.e., certified funds), this should be an immediate red flag. 2. Overseas communication . The wire transfer involves a call or email that appears to originate overseas. Like wise, the use of poor grammar, typo graphical errors, odd spacing or other syntax should all be noted. 3. TTY service. The person making the request communicates using a teletype writer (TTY) service, often used by the hearing-impaired community. TTY services can assist in disguising voices and accents and make calls untraceable. 4. Wire request. There is a request to wire money. 5. Code request. The requestor asks for a confirmation code or a money trans fer control number before money can be withdrawn. 6. Unsecure email accounts. The use of unsecure email accounts (i.e., free, web-based accounts like Yahoo, Hot mail, AOL, Gmail, etc.). 7 Suspicious email addresses. The use of email addresses that are close to, but different from, legitimate and known communication channels (for example, the use of chose.com instead of chase.com). 8. Urgency. Any communication that pressures the recipient for quick action or describes an emergency situation. 9. Unusual amount. The request includes an unusual payment amount or a payment to an unusual party. 10. Odd communication timing. Emails and communications that arrive at odd hours of the day and night. It is clear that the Grievance Committee of the North Carolina State Bar is making an important point with these disciplinary decisions. Other bar regulatory agencies are likely to follow suit. Each transaction requires scrutiny and vigilance.

PRACTICAL ETHICS BY TRISHA RICH Wire Transfer Errors: Red Flags to Avoid Discipline W ire transfer fraud schemes increasingly target lawyers and law firms because they are

tions with the lender, and failed to note numerous red flags in the instructions that should have tipped him off that he was about to be the victim of a wire fraud scheme. King was found to have violated rules related to supervision of legal staff and safekeeping property. • In William Morgan, William Morgan, along with his legal staff, initiated a wire transfer of client proceeds pursuant to fraudulent wiring instructions without verifying the wiring instructions with the seller, and also failed to note red flags that should have indicated that the instructions were fraudulent. William Morgan too was found to have violated rules related to supervision of legal staff as well as safekeeping property. • In the Richard Morgan opinion, Rich ard Morgan was found to have initi ated multiple wires of seller’s proceeds pursuant to fraudulent wiring instruc tions without verifying the wiring instructions first. For that transgres sion (which did not involve inadequate supervision of staff), Morgan was found to have violated rules related to safekeeping property. It is important to notice the shift from civil and insurance liability to a bar griev ance committee finding breaches of ethical duties. This shift underscores the impor tance of lawyers being aware of such scams and being able to identify the red flags associated with wire fraud transactions. Red Flags for Lawyers The list is long, but here are 10 instances that can signal an alert: 1. Checks. Someone sends a check in connection with a payment request. Even if it is a money order or a

often entrusted with transferring sums of money on behalf of clients or other par ties. While wire schemes continue to get ever more sophisticated, the basic premise remains the same: a bad actor tries to get a lawyer to send them money that belongs to the lawyer, the lawyer’s firm, the law yer’s client, or a third party. In recent years, we have seen a multitude of cases related to lawyers falling victim to such schemes. Those cases have revolved pri marily around two issues: first, whether a lawyer committed malpractice when they are the victim of a wire fraud scheme, and second, whether insurance coverage is or should be available as a result of a wire fraud scheme. However, for the first time, a trio of recently reported cases from North Carolina have resulted in lawyers being disciplined for ethics violations related to wire transfer fraud. On February 20, 2023, the Griev ance Committee of the North Carolina State Bar released three separate opin ions related to wire transfer fraud: In the Matter of Jeremy C. King; In the Matter of William H. Morgan, Jr.; and In the Matter of Richard M. Morgan . In each case, the Grievance Committee issued a reprimand against the respondents, finding that each had committed violations related to initi ating fraudulent wire transfers. The opinions are nearly identical but include some distinctions. • In the King opinion, King, through his staff, initiated a wire transfer of a client’s payoff to fraudulent wiring instruc tions without verifying those instruc

Trisha Rich is a commercial litigator and legal ethicist at Holland & Knight, CBA Secretary, and the Immedi ate Past President of the Association of Professional Responsibility Lawyers. You can reach her at trisha.rich@ hklaw.com or on LinkedIn at linkedin.com/in/trisharich.

42 JanuaryFebruary 2024