LMS in its role as a Panel Manager works closely with lenders and law firms to understand the latest techniques criminals are using to try and steal monies from mortgage transactions. LMS has been made aware of the following scenarios and asked whether the impacted parties would be supportive of LMS providing case studies to support and inform the industry, our aim is simply to mitigate the risk of further fraud attempts being successful.
The following case studies illustrate why firms and their clients should be suspicious of any unusual activity or communications, accessing and using independent sources of verification could help prevent a fraud from happening, preventing potential losses for law firms and their clients.
Case Study 1; Email interceptor
Individual A was being advised by XYZ Solicitors in the purchase of a property.
The week on which completion monies were due, Individual A received an email claiming to be from XYZ and confirming a change to bank details for the transfer of funds, seemingly from their law firm.
This email was sent by fraudsters, Individual A arranged for the funds to be transferred.
The fraud came to light only when XYZ Solicitors called individual A to find out what was happening. By the time the fraudsters’ banking provider was alerted, all the money was gone. Individual A is now left with seeking assistance from their bank but could be left bear the loss.
The fraudsters had replicated a genuine law firm to make the fraud appear legitimate.
Case Study 2; The Inside Investigator
Individual B and Individual C were approached via cold calls from the fraudsters who claimed they were from the National Crime Agency and were conducting a large-scale investigation into the Banking Sector.
The fraudsters suggested the individuals would be ‘carrying out a duty to their country’ and would be rewarded for their service with a new property of their choice, new identities and live a comfortable life thereafter. In order to assist in this investigation, the victims were instructed to both open new bank accounts.
The fraudster then instructed the individuals to sell their unencumbered properties through a legitimate UK Company who specialise in buying and selling property for a quick cash sale. Both victims and the UK Company employed the services of a conveyancer to provide genuine legal representation.
After receiving the proceed of sale into their new bank accounts, the individuals were then instructed to withdraw the funds with strict directives not to divulge the true intention of the withdrawal to Branch Staff as not to ‘undermine’ the investigation. To comply with Banking Protocol, the individuals were told to claim the funds were being used for home restoration and travel. The funds were then passed to the fraudsters and have not been recovered.
Both victims are now homeless and living with relatives.
The SRA determined that in the first six months of 2019, law firms reported a loss of £731,250 of client money to crime. The events of 2020 continue to be a challenge for many businesses, understandably resulting in an increasing number of online interactions.
Potential additional solutions;
- Enforce stringent measure for verifying the source of funds, are the purchase deposit funds a result of recent pandemic business financial assistance such as a bounce back loan?
- Review and upgrade software, does your firm have up to date antivirus protection, the latest versions of internet browsers and secure operating systems.
- Set expectations, do you make customers aware of scams and what can be done to mitigate the risk during their transaction, for example provide assurance that ‘We will never communicate our bank details in the body of an email’ or ‘We will never change our bank details during your transaction’.
- Make use of external verification methods such as the LMS Consumer Bank Checker a free service for your clients to check your client account details before transferring any monies.
Please note, we do not provide bank account details as part of the Service and we only confirm whether the details entered by the borrower match our records. Therefore, the borrower can be confident in the account details before making a payment.
Customer Due Diligence (CDD) and Enhanced Customer Due Diligence is increasingly important from a firm’s perspective, as is protecting or alerting your client to potential risks or concerns where possible. UK Finance in conjunction with HM Government has created ‘Five’ a national campaign that provides examples of fraud schemes, Five provides practical and impartial advice to help everyone protect themselves from preventable financial fraud. Further details can be found at https://takefive-stopfraud.org.uk/