Mortgage Fraud and Property Fraud Prevention Policy (May23)

Introduction

Mortgage fraud and other property frauds can have a major effect on the firm and our clients. A lawyer will be involved in most property transactions undertaken in the UK and can find themselves criminally liable if their client commits fraud because of the wide definition of fraud under the Fraud Act. This can even be the case even if you were not aware of the fraud or did not actively participate in it.

In other cases, the lawyer or the firm may be subject to civil claims and disciplinary proceedings. Courts will assume the highest level of knowledge and education on the part of lawyers and are likely to be unwilling to accept claims that they were not knowingly involved if they have not applied appropriate due diligence.

The Law Society has issued a practice note on this area offering some very useful and practical advice and therefore this policy is largely based on that practice note.

Purpose

This policy aims to highlight the warning signs of mortgage fraud and other property frauds, inform you of the procedures that must be followed to help prevent mortgage fraud and explain the reporting procedures should mortgage fraud be suspected.

Scope

This policy applies to anyone in our firm, including managers and consultants working on conveyancing matters involving a mortgage, and any third-party that this policy has been communicated to.

This policy is in line with Requirement 5.14 of the CQS Core Practice Management Standards, effective from 1 May 2022.

Responsibility

Timothy Halliday (COLP/MLRO) is responsible for this policy, monitoring our compliance with it and ensuring that our mortgage fraud and property fraud prevention procedures remain effective.

All of us (and any third-party to whom this policy applies), are responsible for ensuring that we comply with this policy. Failure to do so will be a serious disciplinary offence and may result in disciplinary action.

What is mortgage fraud?

Mortgage fraud occurs where individuals defraud a financial institution or private lender through the mortgage process.

Fraud is defined by the Fraud Act and covers fraud by false representation and by failure to disclose information where there is a legal duty to disclose. False representations can be made explicitly or implicitly and may even occur where you only suspect that the representation might be misleading or untrue.

The value of a mortgage obtained through fraud is the proceeds of crime and you risk committing a money laundering offence under the Proceeds of Crime Act (POCA), as amended, if you:

acquire;
use;
have possession of;
enter into an agreement with respect to; or
transfer this criminal property.

Please refer to our Anti-money Laundering Policy for further details about the offences under POCA.

Methodologies

Criminals will exploit weaknesses in lending and conveyancing systems to gain illegitimate financial advantage from the UK property market. The following sections refer to mortgage frauds and other types of fraud that commonly arise in relation to property transactions.

Criminal methodologies change constantly, so you should remain alert to transactions that are unusual for a normal residential/ commercial conveyance. The main types are as follows:

Opportunistic mortgage fraud

General methodology

Individual purchasers can commit mortgage fraud by obtaining a higher mortgage than they are entitled to, if they provide untrue or misleading information or fail to disclose required information. This may include providing incorrect information about:

identity;
income;
employment;
other debt obligations;
the sources of funds other than the mortgage for the purchase;
the value of the property; and
the price to be paid and whether any payments have been or will be made directly between seller and purchaser.

Use of professionals

Individual purchasers committing opportunistic mortgage fraud will not usually seek to involve their lawyer in the original fraud, it is more likely to become discoverable through the provision of conflicting information.

Be aware of evasive clients and clients trying to dissuade you from advising the lender of any conflicting information.

Large scale and organised mortgage fraud

General methodology

Large-scale fraud is often more sophisticated and involves several properties. Criminal groups or individuals can commit this type of mortgage fraud.

The buy-to-let market is particularly vulnerable to mortgage fraud and sometimes commercial properties will be involved. This method typically involves:

Nominated purchasers take out the mortgage, often with no beneficial interest in the property or they are fictitious;
The property value is inflated, and the mortgage is sought for the inflated price;
Mortgage payments are then not met, and the properties are allowed to deteriorate or are used for other criminal or fraudulent activities;
When the financial institution seeks payment of the mortgage, the fraudsters raise mortgages with another lender through fictitious purchasers, usually for a further inflated value and effectively sell the property back to themselves;
Therefore, as the second mortgage is inflated, the first mortgage and arrears are paid off leaving the fraudsters with a significant profit.

This process can be repeated several times until the point that a financial institution takes possession of the property and finds it in disrepair and worth less than the value of the mortgage and arrears.

Use of private lenders

Fraudsters may use private lenders, such as property clubs, as these lenders often have lower safeguards in place to protect themselves against mortgage fraud than financial institutions.

Fraudsters may target property clubs in relation to properties abroad where the property either does not exist or is merely land without a developed property.

Use of corporate structures

Fraud can be committed by selling property between related private companies instead of between fictitious individuals. The transaction will not be at arm’s length and will involve inflated values.

Off-shore companies are increasingly used, and the companies are selling such properties several times within the group of companies before a mortgage is sought from a lender. Again, the mortgage is sought for an inflated value.

Fraudsters may ask you to act for buyer and seller in such transactions.

Flipping and back-to-back transactions

Fraudsters may try to re-sell property very quickly and for a significantly increased price – this is called flipping and usually involves back-to-back sales of the property. Methodologies for this type of fraud include:

The first mortgage is not registered against the property and not redeemed upon completion of the second sale;
The second purchaser is fictitious, vulnerable or using a false identity; and
A mortgage may only be obtained by the second purchaser which is for a substantially higher sum than the value of the property and the profit goes to the fraudster.

Use of professionals

Professionals are usually used in this type of fraud with the purpose of reassuring other professionals acting for the related parties. This is because lenders rely on such professionals to safeguard their interests and verify the legitimacy of the transaction.

Fraudsters may contact you to:

Ask you to complete the transaction and transfer the title in accordance with exchanged contracts. A lender that has received the loan applications and already approved the loans, may instruct you with packaged transactions and completed paperwork;
Encourage you alter the value on the Certificate of Title given to the lender;
Encourage you not to comply with obligations in the UK Finance Mortgage Lenders’ Handbook (previously known as the CML Lenders’ Handbook)
Offer you continued work at a higher margin to encourage you to conduct less due diligence; and
Recruit you into the fraud, particularly if you have unknowingly assisted in the past or have developed a close relationship with the parties to the fraud.

Equity release fraud (also known as sale and rent back fraud)

Equity release schemes allow homeowners to sell their home to a third-party but remain in the property by then renting their property from the third-party. These schemes also often allow the person to buy back their home if their financial position improves.

In such cases the victim is often the seller, rather than a mortgage lender. The seller may be induced to sell at an under-value, in return for ineffective assurances from the crook.

Mortgage fraud involving equity release schemes may occur in the following way:

A homeowner sells the property to a third-party who is a member of a criminal group or a fictitious person;
A mortgage is taken out by this third-party for an inflated value against the property;
The original loan will be paid out and the money representing the equity in the home will be taken by the criminal group. No payments will be made towards the mortgage;
The homeowner will be unaware of the lack of payments being made until the bank tries to repossess the property and evicts them;
The value of the mortgage will be higher than the original mortgage and the homeowner will not be able to buy their home back.

Sale and rent back agreements are not necessarily objectionable but, besides the above fraud, some owners are tricked into terrible deals.

Anyone offering a sale and rent back scheme must be FCA regulated. Acting in sale and rent back cases is high risk and you need to consider the extra work that will be involved in complying with your regulatory obligations.

Particularly guard against schemes such as Exchange and Delayed Completion (“EDC”) where the promoter of the scheme asserts they do not need to be regulated because the sale has not completed.

Application hijack

This involves fraudsters intervening before completion, claiming to be a new representative (posing as a solicitor or conveyancer) for the purchaser. They will take details of another professional from a professional register and copy the true representative’s letterhead to contact the lender. Their own bank details are provided as the details of the client account. The fraudster obtains the mortgage advance instead of the actual purchaser and then the true representative to complete the transaction, where it is discovered that the mortgage advance has already been paid and there is now no trace of it, contacts the lender.

Impersonation frauds

People impersonate the owner(s) of a property, and so succeed in selling it (to defraud the buyer) or raising a mortgage loan (to defraud the lender). For example:

Following a divorce one spouse may sell the former matrimonial home without informing their co-owner, often using their new partner to impersonate their co-owner;
A fraudster may impersonate the owner of a vacant property; or
A tenant may impersonate their landlord and sell property they have rented.

As well as impersonation of a client, impersonation frauds can involve:

impersonation of conveyancers, where the fraudster may purport to be a conveyancer in their own right or work for an authorised practice; and
impersonation of conveyancing firms, where the fraudster may impersonate legitimate firms of solicitors and/or attach forged headed paper, faxes and email.

The so called ‘Friday afternoon fraud’ (known as this because that is the day many property sales complete, and funds are transferred) is another type of impersonation fraud to safeguard against. This typically involves a fraudster impersonating a client or solicitor in a conveyancing transaction by hacking into their emails and impersonating one or the other to take control of the transaction and divert funds into their own bank account.

Impersonation frauds may also include deepfake impersonations, which are synthetic media in which a person in an existing image or video is replaced with someone else’s likeness. Fraudsters utilise machine learning and artificial intelligence to manipulate or generate visual and audio content with a high potential to deceive.

Film making techniques, which use green screens so that additional images can be placed around actors at a later date, are now being used by fraudsters to superimpose images behind them to try and convince victims they are dealing with legitimate people. For example, a victim may see company logos or call centre activity that makes it look as if the person is calling from a legitimate organisation like HMRC or a bank.

After the event mortgaging

Fraudsters may also use apparent equity to access mortgage funds. This methodology involves:

Private funds (often criminal funds) are used by fraudsters to purchase property at a discounted price, typically involving auction or repossessed properties;
The purchase is completed, and the fraudster will then seek external funding against the property;

The mortgage advance is taken, and they disappear without making any payments.

Another variation of this method is that the fraudster will pose as a property developer and will obtain bridging loans to purchase a number of properties (possibly properties involved in a flipping scheme that have now been repossessed). The bridging loan is sought after the purchase has been registered and possession has been taken of the property.

Claiming deceased estates

Fraudsters may use notices in their local papers to identify deceased estates to exploit for criminal gain. This may be because there are no known heirs or probate has been delayed. This method involves the fraudster seeking to either falsely establish their identity as a long-lost heir or pose as the deceased person. They will then sell or seek a mortgage over the existing equity in the property and then disappear with the funds.

Court orders for sale/vacant property frauds

Some properties that are repossessed will not be sold on very easily, meaning that they are left visibly unoccupied. This methodology involves the following actions:

Fraudsters look for these types of properties and find details of the owners;
The fraudster applies to the County Court for a judgement against the owner over a non-existent debt and will not give the owner notice of this application;
Once obtained, the judgement is converted to an order for sale;
The property is sold to the fraudster claiming the debt or to another member of their criminal gang at an inflated price;
A mortgage will be obtained over the property at the inflated value;
The mortgage advance will be taken, and no repayments will be made.
Alternatively, the property may simply be sold to a genuine buyer, who will be the victim of the fraud.

Authorised Push payment (APP) fraud/ payment diversion fraud

This type of fraud happens when fraudsters deceive clients/ individuals within a firm to send them a payment under false pretences to a bank account controlled by the fraudster. As payments made using real-time payment schemes are irrevocable, the victims cannot reverse a payment once they realise they have been scammed.

Conveyancing solicitors can end up as victims of this type of fraud when criminals intercept the email chain between sellers, buyers, estate agents and solicitors and changes the payment information related to the transfer of funds so that payments are diverted to the fraudsters’ account.

To mitigate against this type of fraud occurring, clients must be:

advised of the risk of emails being intercepted or diverted and to be extremely vigilant if there appears to be any change of payment details or a change of tone to emails; and
asked to call the firm (on the published telephone number) and speak with the file handler/ a senior employee to double check that the bank details they are intending to use are correct before transferring any funds. When making a payment to an account for the first time, it is recommended that clients are advised to transfer a small sum initially and then check with the firm, using known contact details, that the payment has been received.

Warning signs

There are a number of known warning signs, which may be indicators of mortgage fraud or other property fraud.

Identity and ownership

The client or property involved is a significant distance from our offices – also be mindful of bulk, long-distance instructions, if they are do not form part of your usual work – consider asking why the client chose your firm, especially if they are a new client.
The client appears to be very disinterested in the purchase – look for other warning signs which suggest they may not be the real purchaser.
The seller is a private company, or the client has recently purchased the property from a private company – are the shareholders connected with the transaction you are instructed on and is this an arm’s length commercial transaction? Conduct a search of the Companies Register if you have any concerns – cross reference the names and addresses of the office holders, shareholders and persons with significant control with the names of those connected with the transaction, the seller and buyer and check dates shown on the companies search.
The client does not normally invest in property on this scale – what are the reasons for undertaking this new venture and what is the source of funds/ where is the financial backing coming from?
The homeowner has owned the property for less than six months – ask them to explain why they are selling so quickly.
Conversely, the client (according to the Property Register in the Official Copy pf Register of Title), has owned the property for many years but has very limited or vague knowledge of it, especially when enquiries are raised.
The client does not reside at the property you have been instructed to sell.
An electronic identity check reveals a shorter credit history than you would expect for the client’s age – fraudsters may fake an identity for a few months to try and legitimise it – ask your client about this.
There are plans for a sub-sale such as a back-to-back transaction – ask your client why they are structuring the transaction this way and seek information on the identities of the second purchaser, their solicitor and the lender.
The other side’s representation has changed last minute – see the ‘Application hijack’ section above.
A party unrelated to the transaction is paying the legal fees.
The property has a history of being re-sold quickly or mortgages settled quickly.
A transfer of title to land is requested for only some of the seller’s holdings and the properties are not grouped together.
Finance is sought after the property has been registered in the buyer’s name – see the ‘After the event mortgaging’ section above.
The property has been registered to an owner for a significant period of time and the person claiming to be the owner does not appear to be of an age to have held land for that length of time.
The email address of the other conveyancer or solicitor allegedly involved in the transaction is from a large-scale web-based provider.
There is a County Court Judgement against the property.
The land is transferred following a Court Order, but the mortgage is only sought after a significant period of time has passed.

Value

The value of the property has increased dramatically in a short amount of time and is not in keeping with the market in the area.
The mortgage is for the full property value (where 100% mortgages are offered) – consider this in light of the other warning signs.
There are incentives, allowances or discounts involved in the transaction, provided by the seller or developer – has this been properly disclosed to the lender?
The deposit is not being paid by the purchaser – what are the source of funds and has this been properly disclosed to the lender? Ensure that you create a clear audit trail for source of funds evidence.
The deposit has been paid directly to the seller or developer – ask for evidence of the payment and consider whether this has this been properly disclosed to the lender?
You are asked to pay money left over from the mortgage, after the purchase price has been paid, to someone you do not know or to an introducer.
You are asked to include a price on the title that is higher than you know was paid for the property – query why the prices are different.
There has been a recent transfer of land where no money changed hands, or the price was substantially less than the full market value.
The valuation of/payment for chattels with the sale appears high – in such a case, consider requiring an independent, professional valuation.

Protecting yourself and the firm

You should take the following steps (as appropriate for each client and transaction) to minimise the risk of becoming involved in mortgage fraud:

Undertake opening and closing risk assessments
Follow the guidance set out in section 6 – Authorised Push payment (APP) fraud/ payment diversion fraud section as to providing clients with the firm’s bank details and advice to provide to clients regarding transferring funds.
Ask questions – do not be afraid or embarrassed to ask questions of your client if something seems unusual or unclear about their instructions or the transaction.
Best practice is to ensure that you are instructed by and meet face to face all registered proprietor(s) or persons otherwise involved in the transaction and verify the identity of the client (and beneficial owners where relevant) by following the four stages outlined in the Digital Identity Verification Process Policy. This applies whether you are acting for the buyer or seller. You are not expected to be experts in forged documents; however, you should ensure the identities provided correspond with the information on the mortgage documents and bank accounts relating to the transaction. If you have concerns about a person’s identity, consider checking whether they are listed on a negative database e.g. the register of deaths or a list of known fraudsters. – Please refer to the Anti-Money Laundering Policy and/or the Legal Sector Affinity Group (‘LSAG’) AML guidance at for full details of the client due diligence requirements.
Undertake enhanced due diligence checks in higher risk situations and retain full records of the enhanced checks carried out – many mortgage fraudsters provide only paperwork and try to avoid meetings. If you do not meet your client in person, you must take this into account when assessing whether the situation presents a higher risk of money laundering which requires the application of enhanced due diligence measures (again refer to the Anti-Money Laundering Policy and/or LSAG guidance for more details).
Check the seller in particular and that they are legally entitled to sell the property – to address the risk that the seller is an imposter, when acting for a seller, you must seek additional evidence to confirm their identity. For example, ask them to produce documents which only the true owner would have, such as conveyancing papers from the purchase, or receipts for renovation work. It may also be appropriate to insist on meeting the client and keeping a photo of their appearance. If you cannot be sure of the client’s identity, you should consider whether it is safe to continue acting.
When acting for buyer, if you have concerns that there is a significant risk of a fraudulent seller (after noting red flags for example, such as the seller wanting to sell the property quickly and at a reduced rate or providing minimal information in response to enquiries which indicates a lack of familiarity with the property), you must notify your supervisor/line manager without delay and seek guidance from them before proceeding further. Supervisors will be required to retain oversight of the matter until such time as the concerns have abated and, if they do not, the matter must be referred to the MLRO for further guidance.

To reduce the risk of property fraud on the part of the seller when acting for the buyer, we also require the following safeguards to be taken:

a) Seek reasonable assurances from the seller’s solicitors, at the initial enquiries stage, that they have carried out identity checks on their client properly; and b) Always follow the Law Society’s Code for Completion by Post which includes an express provision for the seller to be the owner of the property at completion.
Reliance – do not rely on the reliance provisions in the Money Laundering Regulations (‘MLR’) to minimise the number of due diligence checks that you conduct. Consider reliance as a potential risk in itself – you remain liable for any breach of the regulations if the checks you rely on have not been conducted properly. To protect your firm, you should ask the following questions of the firm or individual you are being asked to rely on:
are they supervised for AML purposes? Mortgage brokers are currently not supervised by the MLR (although they are required to have systems and controls in place to prevent financial crime).
have you done business with them previously?
are they from an established firm?
what is their reputation? A general web search may reveal this
are they able to provide you with CDD material they have? Be very wary if the client or third-party becomes aggressive and threatening when asked to comply with routine document or information checks to try to prevent you carrying out scrutiny. Cross-reference documents received to those in the retainer to satisfy yourself as to the identity of the buyer and, where relevant, beneficial owners.
Before proceeding, ensure that you have been given permission to rely on the third party by the MLRO and there is a written agreement in place between us and the other party.
Identify other solicitors and conveyancers – if they are not already known to you, check that the solicitors acting for the other party are who they claim. This may involve the following steps:
Click on the SRA digital badge/clickable logo which should be on the website of an SRA regulated firm;
If you do not know the other representatives, check the recognised directory of their professional body, namely the SRA’s Solicitors Register, the Law Society’s Find a Solicitor service or the Directory of Licensed Conveyancers, as appropriate
Be aware that there have been occasions when professional directory information has been out of date or incorrect – consider carrying out other reasonable checks such as online free tools or other paid, for services to verify the legitimacy of the other representatives;
Check that the details and the destination of documents match the details in the directory;
Review the SRA’s warning notice on bogus law firms and identity theft to ensure that all recommended steps are taken.
If you have concerns about the bona fides of the other representatives, consider contacting the firm directly using the contact details provided by the professional body. This is particularly important if there is a last-minute change of representation;
Check the SRA’s Scam alert search for warnings about people who call themselves solicitors but are not; and
Do not transfer funds to the seller’s solicitors without first contacting their firm and checking the accuracy of the account details supplied to you.
Consider all information on the retainer:
Sources of information – may be relevant in assessing the risk of the retainer, monitoring the retainer and resolving concerns when mortgage fraud risks emerge. You should consider: documents involved in the retainer, comments by the client in meetings, correspondence or telephone conversations, comments made by other parties to the transaction or their representatives and previous retainers for the client.
Look at each transaction as a whole and consider does it all add up? It will rarely be the case that one factor alone will betray a fraudulent transaction. In most cases it’s a matter of looking at all aspects of the case together and taking an informed view on the likelihood of fraud and the appropriate measures to be deployed to guard against it. Consider whether the property and mortgage are consistent which what you already know about the financial position and sources of income available to the client and check all mortgage and contractual documentation carefully and seek explanations from the client for any inconsistencies.
Ensure that documents are fully completed – You must ensure that all relevant sections of documents are completed before the client signs them to avoid incorrect or fraudulent information being added later.
Signatures – You must only witness signatures where you have actually seen the person signing the document. If any contract or mortgage documents have been pre-signed, you must verify that it was pre-signed in the presence of a witness or ask the client to resign the document in your presence. You should obtain an official document with the client’s signature on at the start of the retainer (such as a passport or photo card driving licence) and use this to compare the signatures on all transaction documents.
Record the value of the property – you must ascertain the true net cash price to be paid taking into account any direct payments, allowances, incentives or discount. This price should then be stated in all of the following documents: contract, transfer documents, mortgage instructions, certificate on title to the lender and land registry forms. If there are any discrepancies in the valuation of the property, you should consider your obligations to report this to the lender. You should also consider reporting any direct payments between the buyer and seller, either already made or proposed, to the lender if they are not included in the mortgage instructions.
Changes to the retainer – you must stay alert to any changes to the retainer that could affect the circumstances in which the mortgage was agreed i.e. undisclosed allowances, incentives or discounts. Again, you should consider reporting any information of this nature to the lender.
Form LL and other restrictions – if a property owner wishes to safeguard against a fraudulent disposition of their property, advise them of the option to apply for the entry of a Form LL restriction on the title. Where this restriction is in place, no disposition of the property will be registered without a conveyancer’s certificate, signed in their own name, stating that the conveyancer is satisfied that the person dispensing with the property is the same person as the proprietor. A conveyancer’s certificate will also usually be required where an application is made to withdraw or cancel a Form LL restriction.
It is important to be aware that placing a restriction on the title is, in some cases, equivalent to guaranteeing the identity of the registered proprietor – which may make lifting the restriction challenging in future, for example when the conveyancer retires.
All purchaser clients should be informed of the HM Land Registry Property Alert Service in the client care letter and/ or final letter to the client and recommended to sign up to help to protect their property from fraud. Once they have signed up to the service, they will receive email alerts when certain activity occurs on their monitored properties, allowing them to take action if necessary.
Advise clients that the firm can register up to three addresses (including an email address and overseas address) for service when registering their ownership of the property at HMLR and explain the benefits of doing so, for example, where a client intends to leave their property empty for a significant period, they can ensure that their registered other address(es) for service includes an address where they can be reached. As the address for service will be used by HMLR if they need to write to the proprietor, charge or other party who has an interest noted in the register, it is important to recommend that the address(es) for service is/are kept updated.

Conflicts of interest, disclosure and confidentiality

The Codes of Conduct which form part of the SRA Standards and Regulations prohibit acting for clients where a conflict of interest arises. In property transactions, you must not act for a purchaser and a lender if a conflict of interest arises between them.

A conflict of interest will arise if you have information about the transaction that the lender would consider relevant to granting the loan, but the client does not want you to inform the lender.

You must disclose relevant information to the lender client, such as any change to the purchase price or any information that the lender might reasonably expect to be important to the decision to grant the mortgage.

This disclosure obligation to the lender is however overridden by a duty of confidentiality to the purchaser client and this duty can only be waived with the purchaser client’s consent, unless the disclosure is required or permitted by law.

Therefore, whilst you should always seek an explanation from the client if any inconsistencies are found, to streamline the process, consent to make relevant disclosures to the lender should be sought at the beginning of the retainer, by way of inclusion of an express authority to disclose matters to a lender provision where a possible conflict arises (without further recourse to the client) We seek such consent from conveyancing clients in our Terms of Business. However, in order for this to be valid, you must ensure that this is specifically brought to the client’s attention and ensure that the client signs a copy of the Form of acceptance attached to the Care Letter to signify acceptance.

Disclosure considerations:

You can tell the lender if you believe that the purchaser has provided incorrect or incomplete information to the lender during the mortgage process. You must seek consent from the client to do this and if they refuse, you must cease acting for them and the lender. If you report information to the lender with the client’s consent, you should warn the client that reporting could lead to the withdrawal of the mortgage offer.
You must still consider legal professional privilege and your duty of confidentiality before passing information to the lender, even after you have stopped acting for the purchaser client.
You are only released from your duty of confidentiality if you think that there is strong prima facie evidence that the client or a third-party was using you to further a fraud or another criminal purpose. This test may be satisfied if a client has made deliberate misrepresentations on their mortgage application.
If you are not released from the duty of confidentiality, you must return the mortgage documents to the lender and advise that you are ceasing to act for professional reasons, without providing any further information. In a conflict situation, where there is a clear instruction from the client not to disclose material information to the lender, you should also consider whether it is appropriate to continue acting for the client in the circumstances.

Reporting and acting upon suspicion of fraud

If you have any concerns or suspicions that a fraud might be committed by the client, or by another party, you must bring the matter to the attention of the MLRO straightaway. You must also notify your supervisor/line manager so that they can ensure that the matter is effectively supervised going forward.

The MLRO will consider the money laundering risk and whether or not a report should be made to the National Crime Agency (NCA) and to the police if they feel a criminal investigation is warranted. If a report to the NCA is made, we must avoid tipping off a potential suspect of this and prejudicing an investigation, in talking to the client or the lender. The risk of tipping off to a reputable lender is small as they are also regulated for the purposes of AML and subject to the same obligations. In addition, there is a specific defence of making a disclosure for the purposes of preventing a money laundering offence.

In relation to asking further questions of your client and discussing the implications of POCA, there is a specific defence for tipping off for legal advisers who are seeking to dissuade their client from engaging in money laundering. For further information, see the LSAG guidance.

In addition to making a report to the NCA we may need to inform others, such as an affected lender for whom we act. The MLRO will advise about this.

As financial institutions are increasingly trying to recover mortgage fraud losses from professionals involved in conveyancing, we must consider whether it is appropriate to report any suspicions of mortgage fraud to our professional indemnity insurer.

Training

All employees working on conveyancing matters are required to undertake regular training, at least on an annual basis, in relation to the avoidance of involvement in property and mortgage fraud.

Regular employee training is essential to help fee-earners and relevant support staff identify key fraud risk factors in property sales and purchases, which make the transaction higher risk, and understand the steps required to minimise them. Criminals frequently change tactics in an attempt to commit property and mortgage fraud therefore it is vital to keep updated on recent trends and to be familiar with recent case law and guidance notes issued by regulators.

The COLP/MLRO will circulate key information for awareness raising on an ad hoc basis, to supplement the annual training, which must be read promptly and queried if not understood.

Review of this policy

This policy will be reviewed at least annually by the Timothy Halliday (COLP/MLRO)

May 2023

Go Back