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Fraud: an increasingly common problem

27th May 2016

One of the biggest issues we face as property lawyers is fraud. This is not surprising when you consider that approximately £620 million pounds is exchanged in property transactions each year in the UK.  Not only do we have to be wary about bogus sellers, but we also have to consider the rising number of bogus law firms.  The Solicitors Regulation Authority (SRA), recorded 736 reports of bogus law firms in 2015, up from 349 in 2012 which is a 101% increase.

Recent cases have seen an innocent law firm send approximately £700,000 to a bogus law firm purporting to act for a seller.  The bogus law firm was a registered law firm, but the particular branch office where the fraud was being committed was not registered.  An apparent employee of the bogus law firm even produced a letter the Solicitors Regulatory Authority had written to the firm confirming receipt of an application to register the new branch. The innocent law firm was found to be in breach of trust to the buyer’s lender.  Other recent cases have seen a sham office being registered on a solicitor’s website.

According to the National Crime Agency, in addition to the risk from bogus law firms, practices are increasingly at risk from cyber-crime.  The majority of recent scams fall into two categories: firms receiving calls pretending to be banks to obtain sensitive information, such as account passwords; and emails between firms and clients being intercepted, leading to client funds being paid into fraudsters’ accounts. You may have read about a recent case whereby a solicitor acting for a seller sent the client an email two days before completion asking for their bank details into which the sales proceeds could be paid.  The buyer duly replied with their details.  However, the email was intercepted by fraudsters, who posing as the buyer quickly emailed the solicitor again telling them to disregard the previous email and to send the monies to a different account.  I am sure you can work out the rest for yourselves and, suffice to say, the story did not have a happy ending.

As you can see, solicitors have to be extremely vigilant in ascertaining the credentials of any law firm they deal with and they have to ensure that their buyer client is protected at all times from being the victim of any fraud.

Nick Smith. Partner & Head of residential conveyancing.

Commercial Property, General, George Ide, News, Residential Property Conveyancing
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