Identity fraud alert
June 10, 2008
Updated: June 23, 2008
The Lawyers Insurance Fund has become aware that another variation of identity fraud has surfaced in BC. Real estate practitioners are at risk.
As with other identity scams, the fraud involves impersonators. In this particular ruse, you are contacted by a son asking you to act on behalf of his father on a sale. The sale, done by way of a private contract (no realtor), is of clear title property. A large down payment has already been paid to the seller. You do not know the son or the father. The son tells you that the sale proceeds are to be made payable to a corporate third party, not his father. You meet with the father to satisfy yourself that undue influence is not at play. You ask the father for identification, and he produces a BC driver's licence and SIN card in the name of the owner registered on title. The father instructs you to pay the funds to the corporate third party, with a plausible explanation. The purchaser, who is part of the fraud, has secured mortgage financing to complete the transfer. On closing, sale proceeds are delivered by the purchaser's notary or lawyer. No undertakings are required from you as title to the property is clear. The true owner later discovers that the property has been transferred and is encumbered by a new mortgage. The driver's licence and SIN card were fakes and the purported purchaser, son and father — all impersonators — have disappeared.
Protect yourself from being caught in a fraud and looked to as a possible source of recovery. Obtain and keep a copy of picture identification from the client. If presented with any circumstances that do not pass the "smell test" — including, in some situations, a request to deliver purchase proceeds to a third party or a large downpayment — insist on the evidence required to put you at ease. And appreciate that some circumstances might only be indicative of fraud when considered in the full context of the transaction (eg. new client; clear title property; private contract). Unless you are certain of the client's identity through your own personal knowledge, reduce the risk of being drawn into litigation with further investigation to help you determine if the matter is genuine. For instance:
- Find out how and why the client chose you to act, and check out the information you’re provided.
- Ask for more identification that may be difficult to forge or fake, such as a passport.
- Ask for a library or some other membership card that the real person would likely carry.
- Seek proof that the downpayment was, in fact, paid to the seller.
- Conduct a reverse look-up search using the information your client provides and the address registered on title to see if everything matches. Call the telephone number your search produces and see if the owner is, in fact, your client. Ask more questions if no number is produced.
- Conduct a BC Online search of the corporate third party, and check that your client's answers to questions you pose fit with the information revealed by the search.
For a complete list of concrete practice tips to help recognize and manage the risk of unwittingly becoming a pawn in either a real estate identity or value fraud, see Real estate fraud – a prevention primer (Insurance Issues: Risk Management). Surindar Nijjar (604-605-5314 or firstname.lastname@example.org) is the Lawyers Insurance Fund contact person in regard to these frauds.