Working Together to Prevent Fraud
Brian and Helen purchased their home in 2013 for $665,000. In 2021, Brian accepted a job transfer out of the country, leaving their home empty. In 2022, their home was listed on the MLS. Three weeks later, it sold and closed for $1.7M. On closing, a $300,000 balance on a secured line of credit was paid off, and fraudsters absconded with $1.4M!
Legal professionals never want their name and firm to be associated with the word fraud. For years, fraudsters have been getting away with committing fraud against innocent lenders and homeowners. Being embroiled in fraud causes undue stress for all involved and causes insurance premiums to continue to rise. Crimes surround us; we need to work diligently together to prevent fraud!
Because of our well-known expensive real estate, beautiful British Columbia is a prime international target for fraudsters. More real estate transactions increase the likelihood that the borrower or vendor will not be who they say they are.
In 2022, vendor-impersonation frauds have risen to the top as the costliest claims in Canada. How confident are you that people are who they say they are? Fake government-issued ID is very difficult to spot and very easy to get.
A strawman is a person that a criminal mastermind hires to make an appearance at the signing of documents. That individual gives the money received from the sale of a property to the mastermind. Recently, a strawman was arrested with 12 identities in his possession and a ticket out of the country dated 2 weeks from his arrival here.
Consider this the next time you close a real estate transaction:
- Are your homeowners exposed? Lenders mandated title insurance, but many BC homeowners have been left uninsured and exposed to loss. Always buy an owner’s policy.
- You act for prime real estate fraud targets; nonresidents, investors and owners of vacant homes. What will you do to protect them from vendor impersonation and prevent fraud?
- In your engagement letter, make it a requirement that new-to-you clients’ have their identities authenticated by a trusted third-party expert before you invest too much time in the file.
- Avoid wiring large amounts of money to new-to-you clients. Issue one paper cheque to the registered owners that way, you have recourse but not when you wire money.
- Stay educated on current fraud trends.