Exclusive report by the SRA for Today's Conveyancer

"How to prevent getting caught up in mortgage fraud"

In the past three years, the Solicitors Regulation Authority (SRA) has taken significant steps to prevent mortgage fraud: catching  out criminals intent on cloning legitimate law firms’ identities, and setting up bogus firms.   

Conveyancing  accounts for a high proportion of claims on  firms’ professional indemnity insurance (about 50% of the value of professional indemnity claims arising against firms); on the SRA’s Compensation Fund (payments made from the Fund have increased from £9.3 million in 2008 to £21.2 million for 2010), and on complaints from the public.   It is well documented that it is particularly susceptible to changes in the economic climate and has the potential to cause considerable harm to consumers. We will, therefore,  continue to target our regulatory resources on conveyancing, to protect the interests of homebuyers and sellers.. 

In a recent SRA survey of 100 firms undertaking conveyancing work, more than half of the firms identified mortgage fraud and money laundering as the biggest risk.  The findings of the research will be used to develop case studies, keep the SRA’s Professional Ethics Helpline up to date and inform the SRA’s review of policies involving client money and the Supervision and Enforcement Strategy for Conveyancing [www.sra.org.uk/conveyancing]

This document is part of the SRA’s over-arching Enforcement Strategy. It is a ‘living’ document, which is regularly reviewed in the light of feedback from our supervision teams, who work closely with firms and individuals. It sets out how we will engage with firms who undertake conveyancing work. 

What to look out for

The SRA provides detailed advice on its website to help prevent solicitors from becoming victims of scams such as identity theft and cloning:  

– If you become suspicious about a law firm for any reason, please contact our Red Alert Line (0845 850 0999 or email redalert@sra.org.uk) as a matter of extreme urgency since some frauds are carried out very quickly.

– Bear in mind that you may come across these frauds in different contexts. Of course, you must keep an eye on any indication that your firm is being targeted or its name being used improperly. If you discover this, you should contact the SRA and your insurers, including consideration of legal action such as an  injunction either to stop misleading statements or to freeze assets if money has gone missing. If there is any evidence of a crime having been committed, you should also inform the Police.

– Search your firm’s name on the internet from time to time, since that might bring up a false office–it may be worth considering doing the same with the names of some of your partners or staff;

– Check your firm and individual details on The Law Society’s Find a Solicitor web page — in case someone has misused your name to set up a false office or to check another firm out.  But, you should not use the ‘Find a solicitor’ function as anything other than an indication of the legitimacy of a firm.  It shouldn’t to be regarded as a definitive source of information.  Always supplement such a search with other checks — including phoning the SRA..  

– Be alert to suspicious incidents, such as transactions that others seem to think your firm is dealing with when you are not;

– Look out for alerts and warnings  about bogus firms on the SRA website..

– To report fraud, including online or internet crimes, call ActionFraud on 0300 123 2040. 

Law firms dealing with conveyancing transactions or other work also sometimes become suspicious of firms on the other side and again it is important that such suspicions are reported and acted upon immediately.

Some examples of factors giving rise to suspicion are

– errors in letter heading

– no landline telephone number–note that numbers beginning with 07 are mobile telephone numbers;

– inconsistent telephone or fax numbers with those usually used by the firm;

– telephone calls being diverted to a call-back service;

– a firm apparently based in serviced offices;

– email addresses using generic email accounts–most law firms have addresses incorporating the name of their firm; if in doubt, check the genuine law firm’s website to identify its contact email address. You may well notice a difference;

– sudden appearance in your locality of a firm with no obvious connection to the area, probably not interacting with other local firms at all;

– a firm appearing to open a branch office a considerable distance from its head office for no obvious reason;

– a firm based in one part of the country supposedly having a bank account in another part of the country–this is a strong indicator and has been seen several times;

– a client account apparently overseas–this is a breach of rule 13.4 of the SRA Accounts Rules and is a major red flag;

– a strange or suspicious bank account name–such as the account not being in the name of the law firm you are supposedly dealing with either at all or by some variation.

The SRA now has a dedicated firm-based authorisation team, dealing with applications from prospective sole practitioners, firms and alternative business structures. It has undergone extensive training in how to spot a bogus firm and has sophisticated checks in place to audit that process, including intelligence sharing with other agencies — both public and private.

Be alert!  Your livelihood and good reputation could depend upon it. 

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