Updated Guidance to Combat Conveyancing Fraud

Published 7 agosto 2020

Following Dreamvar^[1], fraud in the conveyancing sector continues to be a headache for stakeholders and a source of claims against solicitors. To try to assist in the fight against fraud updated joint guidance was published on 26 June 2020 by the Law Society and HMLR^[2]. Key points from the guidance include:

1. Training: conveyancing staff should receive regular training on fraud risk factors, and to maintain awareness of both new scams, and established fraudulent devices. Fraud is cyclical, and old scams can be recycled and/or modified. 
2. Risk Assessment: A written fraud risk assessment should be produced by conveyancing solicitors at the outset of each transaction, with that assessment to be kept under constant review. Whilst related to processes which should be in place to combat money laundering, the risk of fraud should be assessed separately. A transaction may be low risk for AML purposes, but high risk for fraud.
3. Continual Monitoring: The risk of fraud must be kept under review as a transaction progresses. A deal which initially appears conventional can become high risk as time passes and additional risk factors emerge. Matters which fall outside the norm should be considered high risk for fraud.

Fraud risk factors highlighted by the guidance include:

• Impersonation of conveyancers. Fraudsters may pretend to be conveyancers, or to work for an authorised firm. Professionals should check the details of other conveyancers in the transaction, for example with the appropriate professional body. In addition, contact details should be carefully checked as fraudsters can try to appear credible, for example by using an email address which is very similar to that of a recognised firm.
• Impersonation of a seller. Conveyancers should seek clear evidence linking the seller to the property. Extra care should be taken, for example where only limited client contact details are provided, where there is conflicting information, or if you do not meet all the clients face to face. A genuine seller ought to have access to a variety of documents to prove their connection to the property, and supporting evidence should be examined with care to check for forgeries. The guidance also encourages conveyancers to stand back and consider, for example, whether the client’s date of birth is consistent with their ownership of a property, taking into account the date on which it was registered in their name. Corporate owners may also be impersonated, and conveyancers should be vigilant to check that the client is the owner, and discrepancies investigated. 
• A vulnerable registered proprietor. If the owner is elderly or perhaps in a care home or hospital, living abroad, or deceased, the risk of a fraudulent sale may be increased. There is potential for fraud within families, so conveyancers should take care to ensure that proper instructions are taken from all relevant parties to a transaction.  Unrepresented parties may also cause you to re-evaluate the risk of fraud.
• Vulnerable properties. Fraudsters often target properties which are empty, tenanted or undergoing redevelopment. Alternatively high value properties without a registered legal charge (or with a legal charge registered in favour of an individual living overseas) could be vulnerable to fraud. On the other hand, if a property is being sold at an undervalue, this could be an indication of fraud. The type of property being sold should therefore factor in your risk assessment.
• Urgency to exchange and complete. Fraudsters are likely to want to proceed quickly to reduce the prospects of the fraud being detected and funds being recovered. Professional should be wary as urgency may mean the opportunity to reflect on the transaction, and any unusual features, is lost.

Client Responsibilities

The guidance encourages conveyancers to help their clients to take steps to protect against fraud. For example, clients should ensure that their address for service is kept up to date with HMLR, especially if the property is going to be empty, given the risk of correspondence being intercepted, and to register alternative addresses (including an email address) so that they can receive communications whilst they are away.

However, solicitors are warned not to allow their address to be used by clients as an address for service, unless they are confident that they will be able to reach the clients immediately on receipt of a HMLR  notification. HMLR may get in touch years later, and require a response within a short time, which could cause difficulties if the client has moved or is uncontactable.

Next Steps

Everyone involved in conveyancing should carefully review the guidance in full. It provides practical advice to assist in identifying and preventing fraud, as well as on the required steps if fraud becomes apparent or is suspected. Whilst claims arising from fraud cannot be entirely prevented, the prospects of successfully defending a claim may be increased if a firm can evidence that fraud prevention procedures were in place, and actually applied by those involved in a particular transaction.

[1] Dreamvar (UK) Limited v Mishcon de Reya; [2018] EWCA Civ 1082 where a fraudster purported to sell a property he did not own. The buyer lost his money, but successfully recovered from his conveyancing solicitors.

[2] https://www.lawsociety.org.uk/topics/property/property-and-registration-fraud