Mortgage Fraud Protection for Solicitors
In order to help solicitors protect themselves and their firms from mortgage frauds, the Law Society has been issuing various guidelines and information for solicitors to avoid being criminally liable for fraudulent actions of their clients.
Types of Mortgage Fraud
According to the Law Society, there are two types of mortgage fraud which may harm solicitors:
- and organised crime
Opportunistic frauds usually involve giving incorrect information about income with an aim to get a mortgage the clients think they are able to pay but highly unlikely to receive if they would be honest about the height of their income. The other type of mortgage frauds involves organised criminal groups with an aim to make money.
How Solicitors Can Become Victims of Their Fraudulent Clients
According to the Money Laundering Regulations 2007, a solicitor is obliged to verify their clients’ identity and the source of income. If the client is engaged in fraudulent activity and the solicitor fails to prevent them from carrying it out, the lender that suffered loss can claim compensation from the solicitor.
Law Society’s Advice for Solicitors on How to Protect Themselves from Mortgage Frauds
The Law Society is aware that solicitors can’t always prevent their clients from carrying out fraudulent actions and protect themselves and their firms from mortgage frauds and quick house sale companies. However, the Society provides several tips on how to reduce the risk:
Verifying identity information very carefully. Fraudsters often use false identities.
Electronic signature verification. Not only it will confirm the client’s identity but it will also help the solicitor find signs of a potential fraud such as the person being deceased, reports of past frauds, two people with the same name being linked to a single property or inconsistencies with information provided by the client.
Checking the source of money for mortgage transaction. If the client doesn’t provide clear information about the source of money for mortgage transaction or if anything appears suspicious, there is a great chance that the money came from criminal activities or other illegal sources.
What to Do if Suspecting Fraud
The Law Society cautions solicitors against reporting the client to the Serious Organised Crime Agency to get a consent to proceed because the Agency’s consent protects them only from money laundering. Instead, the Law Society recommends solicitors to:
- talk with the client and warn them about the consequences of providing false information
- recommend the client to amend their mortgage application if there are any false information
- consider cessation of action if client gave false information to the lender and refuses to amend application
- consider confidentiality and other obligations to the client before informing the lender or/and police about fraud