Fraud prevention is vital in conveyancing. The sums of money involved in a Conveyancing Transaction makes the Conveyancing industry, and property lawyers in particular, a significant target for fraudsters and criminals. Huge amounts on money can be stolen or laundered through just one property transaction.
Fraudsters are becoming more and more sophisticated in the methods used to perpetrate property fraud. They use numerous ways to either ‘steal’ ownership of a property, or to steal or launder money being transferred, released via mortgage advance, or paid towards a property purchase as part of a Conveyancing Transaction.
The methods used by some fraudsters include, but are not limited to:
- Using forged ID which enables fraudsters to ‘pretend’ to be the real owner of a property. They then fraudulently sell or mortgage the property they are ‘pretending’ to be the legal owner of, in order to obtain thousands of pounds.
- Interception of email communications between a conveyancing solicitor and a client. The fraudster then ‘pretends’ to be that client’s solicitor, passing false account details via email on a fake letterhead to the client, into which the unsuspecting clients then transfers their deposit or balance purchase monies.
- Targeting Unregistered Titles and purporting to be the owner by forging a set of Title Deeds, then using the forged title deeds to sell or mortgage the property without knowledge of the true owner.
- Targeting Buy-to-let investment properties by purporting to be the owner and then selling or mortgaging the property. Investment properties are particularly vulnerable to fraudsters.
Talbots offer to register an anti-fraud restriction at HMLR to protect our clients in this regard on all property transactions.
As a result of the number of crimes committed involving UK properties, the number of victims affected and the large sums of money involved in fraudulent property transactions, property transactions have been categorised as ‘High Risk’ transactions by both the UK Government and our Regulatory Bodies.
This means that property transactions are subject to much more stringent checks than many other areas of law.
Sanctions for failure to comply with the anti-money laundering regulations designed to stop or identify fraudulent transactions are very serious indeed. Non-compliance can involve personal criminal liability that could leading to imprisonment for a conveyancer who has not acted in accordance with the anti-money laundering regulations.
What do conveyancers need to do?
Essentially, Conveyancers need to collect evidence to verify:
- That their client is the person they say they are. This also includes anyone else funding part of a property transaction- e.g., a parent donating money towards a purchase.
You will often hear conveyancers refer to this as ‘Proof of ID’.
This is often done by asking a client to send or bring into the office original or certified copies of specific identity documents and then by the Conveyancer further undertaking an electronic identity verification check.
This forms part of our ‘Customer Due Diligence’ checks (CDD)
- Regulation 31 provides that if we are unable to complete CDD we:-
- Cannot carry out a transaction with or for the client through a bank account.
- Must terminate any existing business relationship with the client and
- Should consider whether we need to make a suspicious activity report to the National Crime Agency
- That a client has sufficient money to be able to complete the transaction, evidence as to where that money is being held at the point it will be paid over to the conveyancer and further to provide evidence to explain how that money was accumulated in that place and over how long.
Again, this duty extends to moneys from third parties who may be making a gift or contribution towards a property transaction.
You will often hear conveyancers referring to this as ‘Source of Funds’ and ‘Source of Wealth.’
What that means is really, where is the money being used to fund the transaction now and how did it get there?
Additional supporting documentation may be required depending upon what clients have disclosed or provided. E.g.,
- We will always need to see bank statements showing where the money is now and how it was accumulated. If money has been transferred between a number of accounts, we will need to ask for Bank Statements for all accounts funds have passed through, so that we have a full audit trail showing movement of all monies being used to fund the transaction.
- If money is from a previously completed property sale, conducted by a different conveyancer, we will need to request a copy of the previous conveyancer’s completion statement as well as a copy of the client’s bank statement showing monies being paid to the client by their previous conveyancer.
- If an overseas property sale was involved, we must request a translated property sale contract certified by a lawyer/ Notary Public.
- If overseas funds are involved, Bank Statements in another language will need to be translated and certified by a Notary Public. There are some countries we cannot transact using funds from.
- If money being used for a conveyancing transaction is from an inheritance, we must request a certified Grant of Probate or copy of the estate account, or other evidence of the amount the client was entitled to receive from the deceased. Again, we may even need to ask for evidence of funds being paid by the Probate Lawyer to the beneficiary’s account.
- If monies are coming from a third party, called a ‘Donor’- e.g., a gift from a parent or relative, as above, we will need to verify the identity of the Donor and investigate where the gifted funds are and how they were accumulated. Bank statements of the Donor will be needed. The gift will also need to be reported to any mortgage lender involved, unless the Mortgage Offer shows the mortgage lender was already aware of the gift and the amount of the gift. We will need written confirmation from the Donor, that the monies involved are an absolute gift and are not repayable. We may also need a Declaration of Solvency from the Donor and an Indemnity Insurance Policy.
- On Company property transactions, we need to have both Company Bank statements and need to verify the ID of Directors and controlling shareholders.
Where a conveyancer is unable to remove ongoing suspicions they have, relating to the identity of a client or the funding of a transaction, they must report the transaction to the Firm’s Money Laundering Reporting Officer who must investigate the matter. The Money Laundering Reporting Officer may need to make a Suspicious Activity Report to the National Crime Agency if suspicions cannot be removed.
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