The large sums of money involved in property transactions and investment have long attracted a high level of fraudulent activity. However, the explosion in internet use over the last decade has led to vastly increased fraudulent activity and with that fraudsters have become more creative in their attempts to steal money.
The new reality is that frauds can now be run from remote locations anywhere in the world and people or businesses have no way of knowing who they are dealing with, unless they check it out. Carrying out due diligence on who you are dealing with, is a vital first step in ensuring prevention is better than cure.
Fraudsters prey on financial opportunity and the volume of property transactions in the UK has soared recently due to the Stamp Duty holiday, which began in July 2020. For conveyancers this has meant more monies passing through their accounts and being paid out to counterparty legal teams and mortgage lenders. Fraudsters know the legal conveyancing cycle, whether it is commercial or residential property transactions, and the law firms involved. Armed with this knowledge they will target firms and individuals to acquire knowledge of pending transactions and can use sophisticated cyber tactics to obtain email information about completion, funding amounts and transmission of completion monies. This naturally lends itself to impersonation attacks where false banking co-ordinates are provided using slightly altered but fake email addresses purporting to come from the real parties to a transaction. In this way they can divert funds to their own accounts from where it will be transferred, almost instantly and often to foreign jurisdictions.
The Law Society warned of this risk in a practice note to solicitors in June 2020. Specifically, the note described how fraudsters are impersonating law firms, intercepting client emails and duping them into sending money. It also estimated that across the economy, over £300m per year has been lost to fraudsters using these tactics to defraud innocent victims. Banks were due to tighten their own practices by creating new processes around “Confirmation of Payee” but the Covid impact may well have slowed this down and in any event it was only intended to cover the six largest high street banks.
