By -

We have become aware of recent instances where law practices have been targeted by sophisticated investment scams, resulting in their trust and controlled money accounts being used to facilitate fraudulent activity and potentially even money laundering.

In these matters, scammers pose as companies seeking to raise capital and request that a law practice act as an agent for the purpose of holding and distributing investment funds. The law practice is provided with details of purported investors and documentation that appear legitimate but are, in fact, fictitious.

In some cases:

  • The purported investor’s identity documents have been fraudulently obtained and misused,
  • Agreements and instructions are falsified,
  • When law practices attempt to verify instructions by contacting the “investor”, they are unknowingly speaking with the scammer, and
  • Funds are released from trust in reliance on these false representations and, by the time the scam is identified, are not recoverable.

How to reduce the risk of facilitating scams

Stop: don’t rush

  • Be alert to the risk that trust accounts are being exploited for fraudulent purposes.
  • Do not rely on introductions, referrals, assurances from third parties or existing clients when engaging with new clients or investors.

Check: verify the source: 

From 1 July 2026, legal practitioners who provide certain services (known as ‘designated services’) will be regulated by the amended Anti-Money Laundering and Counter-Terrorism Financing Act 2006. Read this article for further information about what constitutes a designated service.

Law practices will need to consider whether these obligations are triggered when requested to provide a service, including holding and distributing investment funds.

Suggested steps

We consider the below suggested steps will help law practices avoid being unwittingly used by scammers to facilitate fraudulent activity and potential money laundering. Bear in mind, however, that from 1 July 2026, practices that provide a designated service will be required to carry out specific AML/CTF obligations which, depending on the circumstances, may require further steps to be taken.

  • Conduct thorough and independent identity verification of your client and, where possible, the investor before accepting instructions.
  • If a broker or intermediary is involved, independently verify the investor’s details with that party before any funds are accepted or released.
  • Consider requesting documents that a scammer would be unlikely to possess, such as bank statements evidencing the source of funds.

Protect: act safely

If you suspect that funds have been transferred as part of an investment scam, or that your trust account may have been used for money laundering:

If you have any questions or would like to discuss further, contact Sharon Blake, Chief Trust Account Investigator by email: trust@lawsociety.com.au.

Sharon Blake is Chief Trust Account Investigator with the Law Society of NSW.