The following is an excerpt from a fraud alert recently posted to the Lawyers Indemnity Fund website (a division of the Law Society of British Columbia).

Real estate identity frauds continue – be on high alert

Individual homeowner identity fraud

LIF was recently contacted about a highly sophisticated – and successful – real estate identity mortgage fraud, where fraudsters impersonated the legitimate property owners and obtained a $500,000 second mortgage from private lenders, which they registered against a property in Surrey. The lawyer had acted diligently and obtained several forms of identification including BC driver’s licences, Canadian passports, bank cards, and CRA notices of property assessment. The property was occupied and owned by individuals, not by a corporation. Title insurance was required by the private lender and was obtained for the transaction. While we are continuing to investigate this matter, there was nothing unusual or out of the ordinary about the transaction that would have suggested that it was fraudulent. However, innocent property owners ended up with a fraudulently-obtained mortgage registered on the title to their property.

Corporate director identity fraud

A real estate identity fraud was reported to us that involved corporate-owned real estate. In this 3-minute video, Claims Counsel Sherry Kooner describes the fraud and shares key tips on claims avoidance.

The many variations of real estate identity frauds can dupe even the most diligent real estate conveyancer. More examples of imposter fraud activity can be found in Notice: Recent Mortgage Fraud Activity in BC – LTSA. Be particularly wary of rushed transactions on properties that involve private lenders, have clear title, or are not occupied. Carefully verify your client’s identity for real estate and loan transactions. Be on the lookout for anything suspicious and trust your gut instincts. Ask yourself: does this transaction seem too clean and easy? Even if you physically meet with the client, consider completing a secondary digital verification using authentication technology. See the resource Guidance for virtual verification of your client’s identity using government-issued photo ID and technology.

These frauds have become more sophisticated. If something doesn’t seem right, take the time to investigate. Here are some interesting details we have seen in real estate identity frauds:  

• While the fraud can happen in any context, many imposters posing as owners claim to be off-shore property owners.
• Rental and vacant properties are particularly vulnerable targets.
• Many similar or related transactions involve the same property.
• The client does not require title insurance despite a significant loan, or title insurance has been declined.
• The transaction must be completed in a rush.

Something is off with the ID, for example:
o Photographs in the passport and driver’s licence are of two different people.
o Signatures are different.
o Passport and driver’s licence expire on the same date.
o Photographs in the IDs are the same although they were supposedly taken 10 years apart.
o Picture ID does not match the borrower.
o The person is smiling in their ID (not allowed in government ID).
o The age shown on the ID does not match the borrower.

For more resources, including tips to help keep you safe, see:

For Nova Scotia Members

Review the NSBS Regulations made pursuant to the Legal Profession Act, S.N.S 2004, c.28, including 4.12: Cash Transactions; and 4.13: Client Identification.

Before you open a new client file, be vigilant with every request for services that you receive. Fraudulent requests for services can be made by email, paper mail and courier, as well as individuals who arrive in person to retain you and use your trust account to receive and disburse funds. Be cautious with all cheques received, especially if they exceed an agreed upon amount. When in doubt, contact LIANS for more information on current reported scams and how to avoid them. Remember that you must always confirm a prospective client’s identification in accordance with the Anti-Money Laundering (Client ID) Regulations of the Nova Scotia Barristers’ Society.

In order to avoid fraud in real estate transactions, it is prudent to confirm the legitimacy of the letter with the financial institution that had prepared the letter. If you decide to proceed with a transaction, be sure to go to the bank website to verify branch transit number, address and phone number on the cheque. Wait until the bank confirms that the funds are legitimate and are safe to withdraw from the deposit. You may also choose to use the Bank of Canada’s Lynx system, an electronic funds transfer system in which settlement occurs after the clearing of each individual payment, resulting in the transfer of funds in central bank money from one participant to another. Once settled, a payment is final and irrevocable.