According to Action Fraud, there are a number of ways in which mortgage fraud can occur and conveyancers, who act for both the purchaser and mortgage lender, have a duty to carry out KYC and AML checks that reduce risk and help them stay compliant. Some of the most common methods of fraud are listed below.
- Over-valuing properties or overstating a salary or income
In January 2024, Cifas research revealed that 1 in 6 UK adults have exaggerated earnings to secure a mortgage. - Hijacking genuine conveyancing processes
An example is where criminals target property purchases, with the aim of tricking buyers into transferring house deposits and/or balances to them by posing as their lawyer. - Taking out mortgages in the name of unsuspecting individuals or those who are deceased
Contributing to over 127,000 cases of identity fraud recorded in the first half of 2024 according to Cifas. - Taking out several mortgages with different lenders on one address by manipulating Land Registry data
Here, scammers can attempt to transfer property into their name using false documents, or stolen identities and then raise mortgages against a property or sell it without the real owner’s knowledge.
With fraud on the increase in general and the fact that conveyancing involves high value transactions, it’s no surprise that conveyancing and mortgages are perceived to be high risk areas.
Measures in place to reduce the amount of fraud include fines for conveyancers not carrying out anti-money laundering checks properly. These can be significant and in 2022, the SRA uncovered 252 cases where firms were guilty of non-compliance:
- 49 failures to carry out or complete initial customer due diligence (CDD)
- 40 failures to carry out a money laundering risk assessment
- 39 failures to carry out a source of funds check
- 28 failures to identify a client
- 26 failures to have proper AML policies, controls and procedures (PCPs)
So what other measures can be taken to reduce the risk of mortgage fraud? Taking a look at some of the points above, we consider how this can be done easily and cost-effectively:
- Over stating salary levels
By connecting their case or document management system to an onboarding platform that offers open banking, conveyancers and mortgage lenders can receive 12 months’ bank statements at the click of a button, alerts of any unusual financial activity associated with the mortgagee and carry out reliable source of funds/wealth checks instantly. - Hijacking genuine conveyancing processes
Using an encrypted mail delivery service avoids the risk of emails being intercepted by fraudsters who will impersonate a law firm. Too many people are vulnerable to this type of criminal activity but by using the right tools they can be protected. It’s also possible for conveyancers to integrate these solutions into their own branded web journey, offering assurance to their clients that they are dealing with who they should be. - Taking out mortgages in the name of unsuspecting individuals or those who are deceased
ID verification checks that interrogate the mortality register need to be part of the process and combined with a range of other checks, can offer a very high level of assurance that the person has not stolen someone else’s identity. - Taking out several mortgages with different lenders on one address by manipulating Land Registry data
ID liveness checks that use anti-spoof, anti-tamper, geo-location, biometric facial recognition and 3D Liveness technology, as well as enabling the chip on an individual’s passport to be read using a smart phone, offer the highest level of ID verification. These types of check are being used more and more to provide assurance that the person is who they say they are.
These services are all available as part of a package of onboarding tools that VirtualSignature-ID can offer. The platform and app are both Government approved and offer a suite of solutions for conveyancers from eSignatures (Advanced and Qualified), eWitnessing, automated forms and workflows to conveyancer’s certificates, KYC, AML, PEPs and Sanctions and Source of Funds checks.
Our RESTful API also allows for a digital link up between third parties so that conveyancing firms and mortgage lenders can benefit from seamless communication, reduction in repetitive work and keying errors, which in turn, is helping them to speed up transaction completions.
In conclusion, the investment in technology that can reduce mortgage fraud is worth considering, especially if it can be integrated into existing systems and doesn’t cost the Earth. With the Economic Crime and Corporate Transparency Act 2023 giving more responsibility to regulated sectors to detect fraud and monitor changes in status, automation will be key in achieving compliance and avoiding fines.
If you would like to know more, please get in touch on 0333 335 5176 or complete the contact us form.
