Property Fraud: Getting the Full Picture
By Lydia Dodd and Peter Akyol
The phenomenon of ‘home hijacking’ - where criminals pose as the owner of a property in order to pocket the proceeds from its sale - is just one of the ways in which fraudsters are trying their hand in today’s property climate. Successful frauds have sky-rocketed in the last ten years, with the financial loss from ‘hijacking’ rising from £7.2m in 2013 to £24.9m in 2017. Cases such as Dreamvar (UK) Ltd v Mishcon de Reya, where the real owner of a property was successfully defrauded despite the fraudster failing to provide ID, illustrate a ‘weak link’ of sorts in the conveyancing process. This renowned case sparked questions surrounding who exactly is liable when a buyer discovers that they have not obtained ownership of the property as they thought. Moreover, how do solicitors protect themselves and avoid this liability?
In addition to well-known cases such as Dreamvar, there have been countless examples of similar fraud involving identity theft. In 2005, landlord Graham Hawthorn was impersonated by a ‘tenant’ of his, who went on to successfully remortgage his property for over £200,000. It’s unsurprising that cases such as these have left solicitors anxious to ensure they carry out due diligence checks correctly.
If we take a look at some of the most prevalent cases of ‘hijacking’ in the last twenty years, certain ‘red flags’ recur in most cases. It is important to note that, while these indicators can occur in legitimate transactions, they present a cause for consideration to a solicitor. These include:
- The seller being the sole owner of a property
- The information provided to solicitors (address etc) being inconsistent
- The property being listed under its market value to speed up the sale
- The property having been owned for a long time, yet the seller being younger than expected
- The property is mortgage free
- The seller being anxious for a quick completion without explaining why
- ID provided being very new (e.g. a provisional licence)
Despite there being a somewhat definitive list of these ‘red flags’, there is not yet a definitive Digital Verification service that provides a conclusive assessment of risk when onboarding a potential client. Current checks verify whether ID is legitimate and whether it matches the client, the client’s address, personal information and source of funds. However, as we’ve seen from ‘hijacking’ cases, most of this information can easily be obtained by a criminal ‘tenant’ who intercepts the rightful owner’s post and applies for identification in their name.
At the forefront of effective Digital Verification are the Proptech services that not only carry out these vital checks but utilise a combination of different technologies to ensure thorough verification. More effective still are the services that go further and display this information in an easily accessible report for conveyancers- limiting the risk of these ‘red flags’ going unnoticed. In conjunction with these more stringent checks and reports, part of the solution is to expand these checks to try and zero in on fraud, e.g. by verifying that the client was old enough to buy the property in question at the time it was last sold. Still, this only goes so far.
To combat this level of sophisticated fraud, checks need to not only verify but also collate all the information on a client and present this in a way that makes clear to a solicitor whether they are at risk of being defrauded. This ‘Risk Score’, provided alongside current checks, would alert solicitors to causes for concern early on and remove any chance of human error. Any Digital Verification provider aiming to provide a viable solution to solicitors for this type of property fraud needs to incorporate more of the client’s information into their checks- providing a ‘full picture’ of potential fraudsters.