The Safe Move Scheme reports huge increase in customer payment fraud hitting property buyers

The Safe Move Scheme is warning conveyancers and buyers to take immediate action to prevent criminals stealing deposit money from property buyers. The Safe Move Scheme has, for the first time, asked the City of London Police, to provide accurate data which has been collated across England and Wales, to reveal the extent of this specific type of fraud and to show its dramatic escalation since the first case recorded that can be identified as affecting the conveyance market in July 2013. These figures show that the period between July 2013 and July 2014 saw an average of 1 case reported every 2 months, however in September 2015 (the last month in the latest data set) there were 9 reported cases, representing a 1800% increase. The average loss from buyer deposit redirection fraud is £112,310 and the total losses add up to £10,220,275 from 91 reported cases.

“These figures have come from a request between the Safe Move Scheme and the Met Police to uncover the real extent of this fraud. Until now this fraud has been buried within ‘Mandate Fraud’ category figures, so we are delighted to have been able to reveal for the first time the extent of this problem for conveyancers and their customers.” Ed Powell from the Safe Move Scheme commented.

The issue for the public and also the police is that accurate figures have not previously been researched, or requested for these specific crimes, and also the public in general may not identify with these offences coming under the heading of ‘Mandate Fraud’.

Ed continued: “I understand that The Home Office and the police do not have a specific category at the moment to classify this new threat and it’s important for both the mortgage industry and the public to be able identify that a crime of this type has occurred. We have therefore sort to identity a term that is simple, that everybody could use to describe these crimes and will seek approval at governmental and police statistics level to use the term: ‘Customer Payment Fraud’ which we hope will be easy for all concerned to understand as we begin a high profile public campaign across England and Wales.”

Customer Payment Fraud involving conveyancing is when a buyer is duped in to transferring money to a bank account that does not belong to their conveyancer – as shown in the money flow diagram below. This fraud leaves a buyer with a significant loss and potentially a failed completion to resolve.

Ed commented: “As can be seen from these new figures, it has never been a more dangerous time to buy or sell a property as criminals are targeting property transactions to steal large amounts of money from buyers. The cost of this is catastrophic financial loss that can be life changing for the buyers as can be seen from cases like Mrs Gabb who lost £50,000 and Richard and Sarah Tough who lost £45,000.”

The Safe Move Scheme has been created by BE Consultancy with input from conveyancers, mortgage brokers, lenders and crime prevention agencies providing a series of tools to prevent this and other types of property transaction crime. One of the free tools, called Safe Send, provides secure messaging and file transfer to connect law firms with lenders, mortgage brokers, estate agents, surveyors in place of emails which are not safe.

Safe Send adds reputational integrity to industry professionals and security to consumers provided by its safe alternative to emails, which are not safe.

Safe Send also enhances service delivery by giving customers instant access to all their property transaction messages and files in one convenient place.

BE Consultancy has significant expertise in this field and would like to help address 2 issues that arise from the kind of case covered by the Mail Online on 6th January 2016.

Issue 1 – Is email encryption the answer to preventing Customer Payment Fraud from property buyers?

No. Whilst email encryption is a good idea it must be applied in an appropriate scenario.

The issues for clients are:

1. Criminals use similar email addresses to the conveyancer and encryption offers no protection from this

2. Malicious code, which steals decryption code, is a high risk threat to personal computers, as this type of hardware has a large scope for cyber attacks

3. Installation and use encryption software may cause problems for some users

4. The client may not be able to use handheld devices to send and receive encrypted messages

5. The client may not be able to use other computers to send and receive encrypted messages, such as work machines

6. Installing a decryption code on multiple machines increases the surface area for cyber attacks

Ed Powell has previously commented on what actions firms can take to prevent property transaction fraud. In addition, the Safe Move Scheme is launching a data security accreditation standard which will be published soon

Issue 2 – I have heard that in the past that conveyancing firms have claimed relief involving negligence claims that have been brought before a judge in similar situations to this, can I do this if it happens to me?

The Safe Move Scheme sought the independent expert opinion of a well-qualified professional to comment on whether not using a tool like the Safe Move Scheme may affect a conveyancing firm in regards S61 relief.

Gordons Solicitors:

“I can see that this would be welcomed in the industry by all practitioners and lenders. As for whether this would be an answer to the S61 Trustee Act relief point, my view is that it would be a good example of good practice if it were used widely and was in effect endorsed by practitioners as a tool that is used in order to reduce risk. If it can be established that this was a good tool to use (by lenders), and is used on a broad scale within the profession, then it will strengthen the argument that by adopting it you (lawyers) were acting in accordance with best practice, and so if there were any unfortunate incidents that occurred you would be able to show that you had taken reasonable steps to protect the lender client. That in turn would put you in a better position should you have to seek the relief under S61 of the Act.” – Matthew Howarth – Partner and Head of Gordons’ Commercial Litigation Department

Matthew’s view is reinforced by the conclusion of the high court who in the Lloyds TSB versus Markandan case stated:

“Trustees therefore need to continue to ensure that their decisions will stand up to scrutiny and fall to be classed as reasonable because, even where a third party fraud is concerned, their actions still need to be justifiable in accordance with section 61 principles. Whether this means following the terms set out in the relevant handbook, guidelines or practice note, taking legal or investment advice where required or just using common sense, trustees should make sure that they act with care and efficiency at all stages of administration of a trust.”

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