Working together to combat conveyancing fraud
There is a growing need for the sector to educate professionals and homebuyers on best practice, such as carrying out AML checks and verifying the identity of other firms, says Greg Bryce
Recently, the Law Society's annual professional indemnity insurance survey, which looked at insurance claims among firms of up to 25 partners, revealed that almost a quarter have reported being targeted by scammers in the last year.
The risk of cybercrime is on
the increase across all industries, but the legal sector, and in particular the conveyancing sector, where large sums of money are transacted, remains
a primary target for criminals.
Being a victim of a scam can have a devastating impact, which could lead to the bankruptcy of partners or closure of the firm, loss of
clients and income, irreparable damage to the firm's reputation, and increased professional indemnity insurance premiums.
Concern is mounting that, despite the professional risks, conveyancers are not doing everything they can to ensure they are best protected, and there is increasing pressure for the industry to address this.
The insurer QBE said recently that indemnity insurers would want to see firms' plans for stopping cybercrime when setting premiums this year.
Cyber criminals are using the most insidious techniques to infiltrate systems: hacking into email chains to divert money
to their accounts; stealing the seller's identity or creating an entirely fake seller; setting up
a bogus firm; email spoofing (sending email messages with
a forged sender address); and phishing or vishing, whereby attempts to acquire sensitive information such as usernames, passwords, and credit
card details by fraudsters masquerading as a trustworthy entity are made by emails or telephone respectively.
But the legal sector is
fighting back. The cybersecurity industry is the one of the fastest-growing industries in the world. Electronic solutions, checks, and systems are
readily available to ensure the profession is better protected, but unfortunately they are still not universally adopted.
With regards to the identity
of a seller, the safest and most effective way to ensure all the checks are carried out is by carrying out electronic anti-money laundering (AML) checks.
However, many conveyancers are still merely asking to
see their clients with their documentation and do not make the necessary electronic checks to verify the identity of their client.
Our recent conveyancing sentiment survey reveals that only a third of conveyancers
are carrying out electronic
AML checks on all transactions. The survey also revealed a stark difference in identity check practices according to company size. Sole practitioners are leaving themselves more exposed to the risk of identity theft as only 5 per cent carry
out electronic checks on all transactions. In contrast, half
of all larger firms, of 15 partners or more, carry out electronic checks on all transactions.
In addition to stealing the identity of a seller, the theft
of a firm's identity is a big
area of risk. The Law Society's Conveyancing Quality Scheme and Find a Solicitor service,
and the Solicitors Regulation Authority's Law Firm Search, have all been promoted as means to help identify whether a company is legitimate and regulated. However, while the intentions have been good, information is either not comprehensive enough or
not up to date.
One initiative that has been driven by lenders' desire to reduce risk and verify the
firms on their panels is the Law Firm Search service recently launched by Lender Exchange,
a unique secure web portal owned by Decision First. This enables users to check not only the validity but also the account details of the firm acting on the other side of the transaction.
Clients can check and
confirm the client account of the vendor's solicitor on every single transaction by simply searching the name, sort code, and client account number of the firm that they need to check.
We have recently partnered with Decision First to offer
our clients the service at no additional cost.
Working in conjunction with cybersecurity technology
and services, firms of all sizes, from large conveyancing firms to one-man bands, need to ensure best online practices
and procedures are enforced throughout.
Often the weakest link in cybersecurity is the person using the PC, laptop, tablet,
or smartphone, and there is a growing need for the industry to work together to educate
not only professionals but also homebuyers on best practices to stay safe online. There have been many initiatives to help inform the sector, such as
the Law Society's updated practice note on fraud and the Conveyancing Association's recently launched Cyberfraud and Fraud Protocol, all going some way to help protect homebuyers and firms.