Fraud Alert: June 2, 2010

June 2, 2010

Identity and value fraud schemes: they're back, and anyone doing a conveyance is at risk.

The Lawyers Insurance Fund has become aware that, once again, fraudsters are using real estate transfers as a means of making a dirty dollar. Two years ago, we alerted lawyers to a variation of identity fraud in our Identity fraud alert. Apparently, the rogues that prompted that notice are back in business. The ruse used then involved a son asking a lawyer to act for his father as seller of property, with the father giving instructions to pay the sales proceeds to a corporate third party. The father produced ID (fake) in the name of the owner. The lawyer received mortgage funds from the purchaser and completed the deal. By the time the fraud came to light, the purchaser, son and father — all imposters — had disappeared. We do not know whether the next round of frauds will follow this template or one involving a premise that is a little — or entirely — different.

In addition, it appears that a rebounding real estate market has again created opportunities for crooks to perpetrate value frauds, or "Oklahoma Flips." As reported on in Law Society alert on value fraud schemes, these typically involve flipping property for an artificially inflated price, allowing the new purchaser to deceive the mortgage lender as to the property's real value, and borrow more money than warranted.

The fraudsters are out there. To help protect yourself from being caught in a fraudulent scheme and targeted as a source of recovery, do your reading. Read the earlier alerts noted and the further materials they reference, including Real estate fraud -- a prevention primer. Read mortgage instructions carefully, as lenders may have requirements in terms of disclosure of assignments (flips), as well as client identification. And remember your ethical duty to be on guard against becoming the tool of a fraudster (Professional Conduct Handbook Chapter 4, Rule 6, footnote 3), as well as your obligations in terms of client identification and verification (Law Society Rules 3-91 to 3-102).