10 December 2025

We are aware of recent instances where law practices appear to have unwittingly used their trust account to facilitate investment scams and money laundering. They’re being targeted with these increasingly sophisticated scams, where scammers use their services in an effort to make the scams appear legitimate.

In many of these instances, money launderers pose as clients. These ‘clients’ ask the law practice to prepare escrow agreements and act as agents, holding and disbursing funds for real investors.

When executing the escrow agreement, the law practice contacts a person who they believe is the real investor. They’re actually contacting a scammer who has used the real investor’s identity documents to pose as the investor. The scammer then authorises the funds to be released. By the time the scam is identified, the money is gone.

How to be alert to this risk, and avoid facilitating financial scams or money laundering

Stop

• Remember that escrow services are being targeted by scammers and money launderers
• Do not rely on introductions from a third party or an existing client to verify a new client and investor – (even if you trust the third party or existing client) – you need to be making enquiries yourself

Verify

• You need to practice due diligence by carrying out thorough identity verification checks to be certain your client and, where possible, investor are who they say they are before you act
• After identifying your client and investor, you should consider the money laundering and terrorism financing risk of both
• You need to know the identity of any person acting on behalf of the client, and their authority to act

Check

• Seek to execute the escrow agreement directly with the investor
• Consider asking the investor to provide documents a scammer would not have access to, such as bank statements showing where the funds have come out of to further verify their identity
• If a broker is involved, contact the broker to verify the investor’s details before any funds are transferred

Act quickly

• If you think you have transferred funds to an investment scammer or if you suspect your trust account has been used for money laundering, immediately report the incident to the bank where your trust account is held, AUSTRAC, Victoria Police, Scamwatch and to the VLSB+C via our trust account irregularity report form
• If you think your law practice systems may have been compromised, follow the VLSB+C’s steps on what else you should do if you experience a cyberattack

For more information on how to protect yourself, see AUSTRAC’s guidance on customer due diligence and ‘know your client’ requirements.