06 October 2017 #Commercial Real Estate
One of the biggest benefits of the digital and information age has been the increased agility in carrying transactions – these are now able to take place almost instantaneously. This increased agility has brought with it the problem of increased vulnerability – especially to the risk of fraud.
According to reports, the cost of fraud cost in the UK runs into the tens or hundreds of billions each year (the exact figure is not known, as much fraud is not reported to the authorities). Fraudsters continue to devise cleverer and more devious means. In the real estate world, this can take a multitude of forms. Here are some of the more common ones.
Adopting a fictitious ID and forgery
Impersonation of conveyancing firms
Who is at risk? Everyone is exposed to risk in some form or another. Here are examples of a couple of categories of individuals who are at particularly high-risk.
Individuals who own unmortgaged freehold property. In one case, a criminal gang targeted high value residential properties in the London area being marketed for rent. The landlord only had one notification address (that is, their address for service) recorded on the register of title and that address was the rental property as opposed to an address where they lived or worked. The landlord let the property to the fraudsters and received six months’ rent in advance, which gave the fraudsters possession of the property and time to commit the fraud. The gang successfully sold the property for £1.3m.
The purchase in that case was not registered by HM Land Registry. The registered title fraud was prevented because of certain fraud indicators. In this instance the indicators were:
What can be done? Small changes would have protected the freeholder owner:
Individuals who operate insecure email accounts. We know that details of 3 billion user accounts were leaked by Yahoo in 2013 as part of an online hack. There are malicious groups and individuals out there who scan email traffic for certain words – especially to do with money or banking and then exploit vulnerabilities such as easy or leaked passwords.
What can be done? It is difficult to remember new passwords, but it is worth changing these frequently. Any bank details submitted by email should be confirmed by telephone. That is our standard practice – we ensure that all bank details are verified before money is sent out.
What do we need to do, as solicitors?
We are under an ever-growing responsibility to mitigate against the risks of fraud. Solicitors have long had responsibilities under money laundering regulations to identify clients. This now extends to all people we deal with on property transactions.
We need to be satisfied that other firms are who they say they are, that individual solicitors or conveyancers are bona fide. We have duties with regard to politically exposed persons involved in transactions in relation to the prevention of bribery and corruption.
You will no doubt come up against our procedures which are designed to protect you – and us – against fraud and its consequences. We trust you will excuse us as we carry out our duties to ensure that we obtain proper ID from all our clients and interested persons; as we phone check bank details ahead of making a transfer – and ask you to do likewise; as we occasionally ask searching questions of you to enable us to understand where money is coming from and why things are being done in a particular way.
What can you do to help us?
you are advised to ask relevant questions or, better still, raise your concerns with us.