The house buying process usually involves the electronic transfer of large amounts of money and, to most of us, is the biggest purchase we will ever make.It is therefore particularly concerning that conveyancing fraud has become an increasing problem in recent years.
Perhaps the most prominent recent example of this was Dreamvar (UK) Limited v Mishcon de Reya, where a client of City firm Mishcon de Reya was duped into buying a London property from a tenant posing as the owner. This resulted in the firm being found liable for breach of trust.
Worryingly, at the end of 2016 the Solicitors Regulatory Authority (SRA) reported that email hacking, the most common type of cybercrime, cost clients £7 million during the course of 2016.
Hacking of solicitors’ email accounts, also known as “Friday afternoon hacks” after the day on which most house purchases complete, account for 75% of all cybercrime reported to the SRA.
They are often carried out speculatively to see if any house purchases or transfer of funds are about to take place. The hacker will usually send an email to a purchaser asking for a transfer of funds to a named account. This will originate either from the actual email account of the buyer’s solicitor or an address that is so similar that it can be difficult to differentiate.
Purchasers innocently transfer funds, unaware their solicitor is not in fact sending these emails and that their life-savings are being sent to the email hacker’s nominated account. Thousands, if not millions, of pounds can be lost this way.
Aware of this growing risk, law firms have in response devised alternative ways of communicating bank details with their clients. Primarily, they do so over the phone. Their email footers and retainer letters will now often contain clear warnings regarding the risk of fraud, detailing exactly how they will communicate bank details with their client.
Although law firms are going to great lengths to ensure that their processes are secure, purchasers need to be on guard. As the transfer of funds will have been authorised by the named account holder, banks usually do not take responsibility for this type of fraud. The receiving bank will also commonly only become aware of the fraud after the funds have already been withdrawn.
In a statement at the end of last year, Paul Philip, chief executive of the SRA, said: “We would recommend that people avoid sharing bank details over email, or transferring money before confirming the source of any request.”
Being vigilant is key. It is very unusual for a solicitor to change their bank details part-way through a house purchase. Purchasers are advised to always double-check bank details by phoning their solicitor and asking for these details to be confirmed.
It should be borne in mind that fraudulent correspondence can also include a fake telephone number, so it is best to refer to the firm’s website or original retainer letter for contact details.
Transferring a smaller amount initially and waiting for this to arrive safely before transferring the bulk of the money is an added precaution that can be taken.
Property fraud represents yet another reason for lenders to be cautious and take out title insurance. Our title Insurance policies cover our lenders for the consequences of borrower and solicitor fraud.