The increase of real estate fraud has been confirmed by the Law Society, which has warned the property and conveyancing sector that property fraud is on the rise, with criminals constantly adapting their methods to evade detection. There is also a suggestion by businesses providing risk management and anti-money laundering services that the risk of property fraud tends to rise when sales are quick. Given that the time to find a buyer is markedly down from 88 days on average in May 2020 to 31 days now, this may indicate a rise in property fraud is imminent.
What are the main types of property fraud cases UK?
According to the Law Society, There are several types of property fraud, including:
- Impersonation fraud – the criminal impersonates a person involved in a property transaction for their own gain. They may pretend to be a buyer, seller, conveyancer, lender, or a borrower.
- Buyer fraud – the criminal pretends to be a genuine buyer but steals any loaned funds or uses the information gleaned in the process to commit title fraud
- Seller fraud – the criminal impersonates a property owner and steals funds
- Lender fraud – lender fraud can occur when a criminal forges a document (called a discharge) from a lender purporting to show that a property’s mortgage is paid off
- Conveyancing fraud – whereby the criminal pretends to be a conveyancer using fake letterheads using a range of techniques to appear genuine
- Company fraud – company fraud occurs when a criminal imitates an existing company or a false company – this poses a significant risk in commercial property sales.
- Title fraud and registration fraud – this occurs when a criminal steals the identity of a property owner with the intention of changing the ownership of the title to their own.
- Mortgage fraud – whereby criminals steal money from lenders by pretending to be genuine mortgage applicants.
Conveyancing firms across the UK have put in place systems and processes to ensure the identity of those they are dealing with. For example, to avoid payment diversion fraud, before transferring funds from a lender or purchaser to the seller, they will make a number of checks to ensure the bank account details provided are correct. Joint guidance issued by the National Crime Agency, Action Fraud, the National Economic Crime Centre and the Law Society has even been issued to warn the public of the risk of this type of crime. They advise members of the public transferring money for a property purchase to send a small amount of money to verify the account details they have been provided are correct. It is also advisable for property owners to sign up for Land Registry property fraud alerts.
What are conveyancers doing to prevent property fraud UK?
Conveyancers are already doing a great deal to prevent property fraud, including carrying out mandatory identity and AML checks. All law firms dealing with property transactions should have a risk register and risk management process to spot any potential for property fraud across their operation. Anti-fraud processes and systems should be constantly updated and improved in light of the latest types of property fraud to move any weaknesses in defences.
Conveyancers are highly alert to the often subtle signs of potential fraud, including situations where a client:
- Does not provide a full set of contact details
- Relies on utility bills as evidence of residence
- Does not live at the property
- Provides information that differs from that on the electoral register or other reliable sources
- Requests that the bank account where funds should be paid be changed
- States the transaction is urgent without providing good reasons why
- Lists a property less than its market value for a faster sale
- Is evasive and will not provide full answers to questions
- Provides a different address to that of the property they own and occupy
The Law Society also advises that if it is not possible to meet a client face to face, this may represent a higher overall risk for property fraud, such as money laundering. In this case, enhanced money laundering measures may be warranted.
Final words on property fraud
Modern IT software is now playing a key role in helping law firms to stamp out property fraud by providing automatic checks and validation, predefined mandatory workflow processes, and property fraud alerts, flags, and warnings. With a combination of effective risk management, IT, fraud training, and robust due diligence, it should be possible to prevent all acts of property fraud, thereby protecting the interests of clients and firms providing conveyancing services. Members of the public involved in property transactions can also do a lot to prevent fraud by adhering to the advice provided by the Law Society and being vigilant for any signs of suspicious activity during the conveyancing process.
Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey. We have a highly experienced team of residential property Solicitors and commercial property solicitors who can assist you with any legal matter relating to conveyancing fraud. To make an appointment, please get in touch or call us on 01932 840 111.