How property fraud is still a big problem

Published by GlobalX on Feb 05, 2020

It is well documented that buying a home can be one of the most stressful transactions a person can make in their lives.

Left at the mercy of so many stakeholders in the home buying and selling process, buyers and sellers can often feel uninformed and detached from the process they are so invested in.

Unfortunately, and despite the widely publicised understanding of the threats, the property market suffered a range of property frauds incidents last year.

Cyber attacks, impersonation fraud and solicitor errors can have devastating implications for the home buying and selling process.

Here, we look at some of the successful attempts and consider what law firms should do to protect themselves and their clients.

Phishing and Redirection Fraud

Towards the end of 2019, two young first-time buyers (FTB) were left distraught after losing £94,000 to a phishing attack.

Cyber criminals had intercepted emails between the FTBs and their conveyancer before creating a similar email domain and sending new emails to the couple pertaining to be the conveyancer.

In this instance, the couple did not query the email, continued to communicate using this address and ultimately parted ways with the money intended for their first home purchase.

Having waited days without exchanging contracts, concerned conveyancers investigated and exposed the fraud. In light of the time that had lapsed, the entire chain collapsed as a result of the fraud.

On average, victims of bank transfer or authorised push payment (APP) fraud are only being compensated with 48% of their total losses, according to Shieldpay data.

15% of victims do not receive any form of compensation despite the introduction of a voluntary code in 2019 by a number of the UK’s leading financial institutions.

Unfortunately, this will mean the conveyancer is footing the bill and considering the current shortfall of £3 billion, this will add considerable financial damage to an already blemished reputation.

Many law firms are incorporating the following processes to avoid incidents like this from succeeding:

  • Client education – most email footers now warn clients about redirection fraud and remind them that their bank account details will not change. If the legal service provider makes this explicit from the outset, it could raise client suspicions before they send their financial details.
  • Embedding a cybersecurity culture – firms should be training their staff to understand the warning signs of phishing attacks. This may then embed a culture within the firm which could permeate through to their clients.
  • Encouraging clients to report the email to the firm, ignore the communication and delete the email.

Impersonation Fraud

Law firms now need to ensure they have robust money laundering processes in place following the introduction of the fifth anti-money laundering directive.

In the past year, consumers have convincingly impersonated a legitimate owner of a property and a law firm has mistakenly employed a female employee masquerading as a legitimate solicitor. Both cases resulted in property fraud and contributed towards the proliferation of illicit funds.

Experienced solicitor, Johnbosco Eberechuckwu Onyeme, was struck off the roll at the end of last year after hiring ‘solicitor A’ as a fee earner.

The director of World Secure Solicitors Ltd was lured in by ‘solicitor A’s’ claims that she already had a number of clients looking to complete a number of property transactions.

Having obtained a copy of her practicing certificate and driver’s licence, Onyeme used the Law Society website to search for ‘solicitor A’ and was satisfied she was a legitimate criminal lawyer.

During her time with the firm, ‘solicitor A’ completed two fraudulent conveyancing transactions where £1.15 million intended for the sellers was instead sent to third party accounts with the transactions using forged land registry documents.

Having gained the trust of the firm, solicitor A also processed another transaction without a clear audit trail, leaving a trail of devastation in her wake.

Similarly, a woman was jailed for 20 months last year for impersonating a legitimate owner of a property and selling it for £75,000 without the consent of the legitimate owner.

Sarah Broadbelt changed her name to that of the home’s legal owner by deedpoll. After opening two bank accounts and obtaining a passport, she passed all AML checks and convinced the solicitor to process the sale of the home.

Despite the data suggesting that Broadbelt was six when she purchased the property, conveyancers were persuaded that the home was bought in trust.

The sale of the house also bypassed suspicion with the £200,000 property being sold for only £75,000.

5AMLD suggest the use of electronic verification technology which can identify false documentation or pull out anomalies like new bank accounts, helping to spot the warning signs before any damage is done.

GlobalX is able to offer a comprehensive range of Due Diligence Searches which can become a critical component in helping you verify the contacts that you are doing business with.

These invaluable reports will provide key insight into the financial standing, contractual obligations and backgrounds of an individual or company. With our hassle free due diligence search services, you can be assured of accuracy, speed, and improvements in efficiencies.