Property fraud is unfortunately becoming more and more prevalent, as is fraudsters sophisticating their efforts to defraud people and property. We highlight here a couple of pertinent issues to be aware of with some suggestions on how to minimise the risk to yourself and/or your clients.
The recent case of Purrunsing –v- A’Court & Co and HOC (2016) highlights one way in which fraud is accomplished. A fraudster “Dawson” claimed to be the registered proprietor of a property in Wimbledon. In 2012 he instructed A’Court & Co (“A’Court”) to act on the sale of the property. He produced a forged passport and several utility invoices for an address in Maidenhead. There was absolutely no allegation that A’Court should have been able to detect the forged passport. The title register showed the property address for the registered owner, together with another address for service in Cambridge. Dawson told A’Court that he was not living in the property and that the property was vacant and had been given to him by his father in 2008. He instructed A’Court to effect a speedy exchange and completion because he needed the money. If A’Court had attempted to contact Dawson at the Cambridge address, the fraud would have been uncovered at that point.
The first purchaser’s solicitor asked A’Court to confirm he had verified Dawson in accordance with Money Laundering Regulations (“MLR”) and he also requested confirmation of the address of the hospital Dawson stated he worked at in Abu Dhabi. At this point Dawson pulled out of the sale, to avoid having to respond, with the excuse that the buyer was prolonging the transaction. If Dawson were genuine, then the provision of employment information should have been a simple letter procured within a day or so. Dawson had never informed A’Court that he worked aboard.
All conveyancers must be aware of and alert to the MLR at the outset of the transaction. These should highlight to you what additional queries you should raise, clarify and verify with your client.
The second purchaser to agree to purchase the property was Mr Purrunsing who agreed to purchase the property with a secured loan and the selling agent put him in touch with a mortgage broker. Mr Purrunsing instructed HOC to act for him.
A’Court sent a contract, official copy register entries and the completed property information forms to HOC. Dawson instructed A’Court that there was to be a simultaneous exchange and completion by no later than 29 October 2012.
HOC sent some Additional Enquiries to A’Court in an attempt to establish a link between the property and the proposed seller, which was never established. HOC continued with the transaction.
Owing to the speed of the transaction, Mr Purrunsing raised the purchase funds from life savings, friends and family and sent these to HOC who, in turn, sent them to A’Court who sent them on to Dawson, to an account in Dubai. Completion (in terms of registration of the transfer at the Land Registry) was never effected. The funds were never recovered.
The following are a few things which should act as alerts:-
- The property is unoccupied.
- The property is unencumbered.
- The property is of comparatively high value.
- Completion being pressed for on an expedited basis by the seller.
- The official copy register entries contained an alternative address for service.
Special attention should be paid to:-
- Taking extra care to know and care for vulnerable properties.
- Write to every address on the register to ensure contact with the true owner.
- Obtain paper evidence linking the seller to the property.
- Keep dated and timed detailed attendance notes on file.
- Keep on reviewing the matter to ensure you capture and deal with any oddities and inconsistencies; and
- Know your client. If possible, ensure you meet with them personally.
Another frequent target for cyber criminals is emails between conveyancers and their clients in an attempt to intercept money at completion of property transactions.
Fraudsters are known to use malware to attempt to access computer systems of solicitors, estate agents, sellers and buyers. If they gain access they will monitor emails between all parties. Nearing completion, the fraudsters will intercept an email from the seller, or sometimes even fraudulently intercept an email from the seller, informing the parties that the bank account details have changed and requesting that the sale proceeds are paid into an alternative account.
If the practitioner does not verify these details, the sale proceeds are then transferred into a “false” bank account. By the time this has been discovered, the fraudsters have already moved the money into unreachable accounts.
Since conveyancers are governed by the SRA Code of Conduct, they are aware and know that they must protect client money and assets, which would make them liable in the event such a fraud occurs.
So, all those who deal with property transactions would be well advised to monitor and query any change of bank account details and see this as a “red flag” alert.
Some points to consider would be:-
- Do not accept any electronic instructions regarding a change of bank account details.
- If you are advised of a change in bank account details, check the original bank statements for the new account and keep them on file.
- Obtain written approval from your client to verify the new details with the bank.
- Have your client confirm their account to you details verbally, not electronically.
- In the event bank details are changed, ensure a second internal sign off is obtained for your file.
You should note that email is not the only route to fraudulent activity. Correspondence and faxes can also be intercepted or forged so be alert and aware at all times and ensure any changes are checked and clarified with the original documentation. Query any discrepancy with your client by telephone.