In the first blog, I talked about risks that conveyancers face from criminals. With fraud on the increase, in this blog, let’s take a look at two recent cases and see what lessons can be learnt.
- 1. The recent case of Max Hastings and his wife shows some of the difficulties
By using Land registry records and searching for high value properties to let, fraudsters took a let in a false name on a high value property owned by Mr Hasting’s wife. They then changed their name to that of Mrs Hasting by deed poll and obtained a genuine passport in that name. Using this document, they then proceeded to sell the property via another estate agent.
The conveyancers inadvertently sent the sale proceeds to the criminals as they were unaware the fraudsters were not the real owners.
Neither the estate agents involved in the letting or selling nor the conveyancers acting for the buyer or seller managed to stop this. The person to lose out was the unsuspecting buyer who was left without a house when the fraud came to light.
- 2. Mr & Mrs Tough’s case this year
This case was different in that the criminals targeted a high value property and then hacked the client’s email. They then cloned the lawyer’s email account and sent the client an email saying “please send your deposit to a different client account”. Some say the client was daft to not check this out, but haven’t we all opened a fake email or replied to one of the spurious requests only to find its another scam?
So what can be done? There is no silver bullet of course and even the toughest security (excuse the pun Mr & Mrs Tough) is not impregnable, but we must try and be seen to be trying. So here are some basic steps conveyancers should take to protect everyone in a residential property transaction:
- Do a risk assessment on every file you open – watch out for properties where you don’t see the client, pay closer attention to those buying or selling without mortgages
- Get clients’ bank details at an early stage and be careful of those not based in the UK
- Make detailed enquiries as to the source of funds for deposits and balances, especially if no mortgage is being used
- Use the Lender Exchange to verify that the bank account of the firm on the other side is genuine – there is no excuse not to do so, it’s FREE. If not, consider using Lawyer Checker to make further enquiries
- Do an enhanced Anti Money Laundering/ID check on all clients – they are not fool proof, but in conjunction with certified ID – be it by you or an approved 3rd party such as the post office or other regulated individual - it will certainly help to cover your back
- When acting for clients you do not see in person, consider using Skype or other similar web tools to check the person you are speaking with is that on the photo ID
- Educate your clients at the outset of transactions as to the risk of possible fraud. Consider sending a separate letter to address the risks and ensure they understand that you will not email them bank details and that these should be given in hard copy correspondence or by phone
- Ensure your IT supplier carries out a regular security audit to stop hackers gaining access to your servers and consider using server farms / cloud computing where part of the benefit is that all necessary security measures are undertaken by the host
- Try and obtain insurance to cover you in the event of a cyber-crime. This is not covered under your Professional Indemnity policy, but separate policies are now becoming available
- Stay vigilant and watch the legal press for any new issues that are becoming apparent for the months and years ahead. As I said, at the start the stakes are high and the criminals will look for other avenues to make a fast buck
Only recently, the High Court has ruled that conveyancers on both sides of a transaction are liable for the actions of a rogue seller who committed a £470,000 property fraud. It’s a landmark ruling and conveyancers must pay heed.