Enhanced identity checks are a must to stamp out fraud

With fraud showing no signs of abating, there is an urgent need for more stringent due diligence across the board

DAVID KEMPSTER, MARKETING DIRECTOR, MDA SEARCHFLOW
DAVID KEMPSTER, MARKETING DIRECTOR, MDA SEARCHFLOW

At The Law Society’s Property In Practice conference last month, it was revealed that the Land Registry had uncovered property worth £20m that had been transacted with a fraudulent title. This figure, together with several other stratospheric sums released by the National Fraud Authority and others, suggests that robust processes are far from being in place across the board.

As a result, lender concerns show no signs of abating, with regular and dramatic changes to the size and membership of their panels now common and smaller practitioners hit the hardest.

The degree to which mortgage and title registration fraud is being perpetrated by using a false identity or stealing another person’s identity has become an issue that lawyers must address from the moment a prospective client walks through the door.

An effective and comprehensive risk management strategy – including regular identity checks on a global scale – must be introduced as a matter of urgency for all firms.

At the moment, registration fraud can work like this – a client wants to transfer a property to a relative in the form of a gift.

There is no face-to-face meeting with the client, some photocopies of driving licences and passports are sent in the post by the client to the solicitor, which were certified as true copies by another unverified solicitor.

In many cases, the signatures are illegible and there is no solicitor identified as having signed the certified copies. Even so, once this documentation is in place it is possible that the title can be transferred.

Traditional methods of copying passports and driving licences are no longer robust enough

No prizes for guessing what happens next. It transpires that the identity of the relative who was meant to be receiving the title of this property has been stolen so that the fraudster can remortgage the property to obtain funds from the lender.

Unfortunately, some clear warning signs of this common scenario are often not picked up, such as the urgency of the transaction, communications from a distance, and only one owner involved in the transaction. All these things should get alarm bells ringing.

By using anti-money laundering and anti-fraud controls to vet both UK and foreign nationals, law firms will be in a stronger position to signpost these risks before disaster strikes and to also build credibility with lenders and the Solicitors Regulation Authority.

Clearly, traditional methods of copying passports and driving licences to check identity are no longer robust or good enough.
Instead, firms need to perform enhanced due diligence on all the clients who present themselves, and especially when there is no face-to-face contact.
Not only that, but the ability to accurately check identity will continue to play a vital role in limiting liability as well.

The Law Society and Land Registry are now shining a clear unified light on the need for enhanced due diligence beyond passports and driving licences, and for businesses to have robust and visible anti-fraud procedures in place.

This includes e-verification processes that will help identify potential problems more quickly so that investigations can be made where necessary.