The Council for Licensed Conveyancers (CLC) cited Brexit, cyber crime and fraud/money laundering as the three main challenges to the property sector in 2019.
Throughout September, the Solicitors Regulation Authority (SRA) issued a new scam alert every other day as unscrupulous criminals targeted the perceived rich pickings from law firms and their clients.
The scams were diverse, ranging from the fraudulent use of identity documents and letters pertaining to represent law firms all the way through to fraudulent emails encouraging clients to redirect their payments to an unknown third-party bank account.
Responding to the increased threat, a number of regulators and legal bodies issued fresh advice regarding property fraud in recent weeks.
The Law Society provided up to date advice and practice notes to its members on this ever-increasing issue. The advice was aimed at all stakeholders in the home buying and selling process looking at issues from identity theft and impersonation fraud through to money laundering issues.
The CLC also issued fresh consumer facing advice regarding ID and money checks; explaining the importance of ID checks, the reasons these checks are replicated and the increasing threat of property fraud caused by money laundering.
Additionally, the Conveyancing Association (CA) recently emphasised the importance of ID checks but expressed concern regarding the number of checks consumers have to go through using the current system and the benefits from overhauling the current system.
A recent Government consultation highlighted that the information and data it holds on individuals’ passports could be opened up, utilised and accessed as a holistic ID verification tool.
The CA statement in September insisted the trade body remained committed to Government-led digital identity which would be accessed by all stakeholders and their relevant regulators to provide ‘one source of truth’ as opposed to the plethora of checks that are currently needed to satisfy the various regulators involved in the home buying and selling process.
Whilst technology could provide a solution to help firms remain compliant, firms in the present are frequently overwhelmed by these constantly shifting issues. Of the 51 on site inspections completed by the CLC in 2019, 34 were been deemed non-compliant.
49 of the inspections were considered routine with two inspections targeted specifically at particular firms. Only 29% or 15 firms were generally compliant with CLC regulations.
The majority of firms considered non-compliant struggled with anti-money laundering (AML) regulations and adhering to accounts codes. In particular, many firms were struggling to adopt AML policies and procedures, implement risk assessments, keep adequate records of staff training and Money Laundering Reporting Officer (MLRO) enhanced training and documenting the source of funds.
As property sector regulators increase their advice and guidance on an issue plaguing the sector, Today’s Conveyancer has asked a number of experts to comment on the impending threats and how property sector stakeholders can effectively combat them in the future.
A Council for Licensed Conveyancers (CLC) Spokesperson commented:
“By virtue of having client accounts and holding large sums of customers’ monies property lawyers will always be a target for criminals. At the same time criminals continue to see residential property transactions be that through purchase, buy-to-let or mortgage fraud, as an effective way of laundering their dirty money.
“It is incumbent on the practices the CLC regulates to protect themselves, their staff and their clients though effective and ongoing scrutiny and training.
“This includes:
- Effective identification and verification of clients, with all staff who carry out this function being properly trained
- Making sure all relevant staff know the red flags to help identify money laundering and have a clear process for raising concerns
- Ensuring all staff are trained and kept up to date about scams, social engineering and cyber-crime
- Clear and repeated information to clients that they will not change bank account details by email.
“We know that there will be potential clients and transactions that feel out of the ordinary or where something feels ‘off’. In that case any CLC regulated practice should pick up the phone to their Regulatory Supervision Manager and feel free to talk through their concerns.
“The CLC wants to support the practices we regulate and we do this through a wide range of approaches and tools. This includes providing training workshops, roadshows and webinars along with support material and digital toolkits. So, we have this year developed enhanced training for Money Laundering Reporting Officers (MLROs) as well as providing an AML web toolkit and have a fraud and cyber-crime toolkit coming later this year.
“Training, vigilance and good processes can assist in providing security to all those involved in home buying and selling and we at the CLC expect our practices to play their part.”
Olly Thornton-Berry, Co-founder of ID Verification software Thirdfort, commented:
“Fraudsters are getting increasingly sophisticated at producing authentic looking fake ID documents.
“Given forensic experts struggle to detect these, it is vital conveyancers have access to the best identity verification technology available.
“At present, many conveyancers still rely on certified physical copies of documents which is outdated and cumbersome for both conveyancer and their client.
“Technology provides a much faster and safer way to carry out identity checks by automating much of this process, removing the need for any physical documents to be supplied and being much more effective at spotting fakes.”
Tom Lyes, Key Relationship Manager for Lawyer Checker, said:
“Criminals using email to target law firms and their clients seems to be the biggest threat from a cyber perspective to Conveyancers right now.
“Stories are reaching the national press almost monthly and the SRA Scam alerts paint a precarious picture.
“Unfortunately, there is no silver bullet available to combat these threats, therefore it is imperative firms review their technical and cultural competencies in this area.
“Culturally, firms need to look at how they communicate to clients that their bank details will never change.
“It has come to a point whereby using email footers and being tucked away in client letters is no longer enough. Technically firms need to protect what’s theirs by implementing DMARC.”
