Fraudsters commonly target law firms. Law firms can fall victim to well-structured and convincing shams and become unwitting participants in fraudulent arrangements. Property lawyers should be vigilant in this respect and follow the provisions of:
With mortgage fraud, criminals try to receive mortgage monies from a lender in relation to a transfer of a house which was never on the market. After completion, they disappear and it usually transpires that they provided false, but convincing, details.
All colleagues should be wary of hackers and fraudsters providing false account details. Always call on a number you can trust and check with the third party providing account details that what you have received is right. Emails can be intercepted and changed. The true identity of the sender of an email can be hidden. You should expect third parties to make the same checks on us. The Law Society keeps a list of correct telephone numbers for law firms, and other regulators keep similar lists for their industries. Do not call the number in the email or on the letterhead; that may not be correct either.
Property colleagues must be aware that imposters claiming to own property may seek to use them to sell it. Particular care should be taken in relation to identity fraud and fraudulent property transactions. The fact that a fraudster has produced convincing documentation will not necessarily protect the firm from liability if completion monies are released as part of a non-genuine transaction. The courts have repeatedly held that solicitors acting in conveyancing transactions hold completion monies on trust and may be liable for breach of trust if those monies are released otherwise than in accordance with a genuine completion - see Dreamvar (Dreamvar (UK) Ltd v Mishcon de Reya). In some circumstances, the firm may be required to restore the monies even where it has itself been the victim of a fraud. Solicitors should therefore be meticulous in verifying identity, ownership and authority before exchange and completion. Particular care should be taken where a transaction contains any warning signs associated with impersonation fraud, vacant properties, mortgage-free properties, absent owners or unusual urgency.
In addition to potential negligence claims, a firm that facilitates a fraudulent transaction may face liability for breach of trust, breach of undertaking and associated losses. The fact that the firm acted honestly and without negligence will not necessarily provide a complete defence. Lawyers must therefore satisfy themselves that the client does own the property and must personally review the AML documents, requesting copies from the Clients Team, if necessary. Any concern regarding identity, authority or the authenticity of a transaction should be escalated immediately to the Compliance Team.
You should also read our Guidance Note on Impersonation Fraud.