Lawyers must be vigilant about the potential for identity fraud, even after having identified and verified clients. If something does not seem right about a transaction that comes into your office, ask questions.
Let’s look at one well know identity fraud scheme as an example:
In a typical variation of this scheme, fraudsters identified properties which were mortgage-free. They obtained false drivers’ licenses in the names of the owners, then applied for private mortgages. The interest rates on the loans were typically higher than rates offered by chartered banks. The fraudsters instructed their lawyers to advance funds from trust to third parties who were alleged to be contractors performing renovations. The aggregate advances were equivalent to the full mortgage proceeds. Ultimately the homeowners, who had no knowledge of any of this, ended up with a mortgage on their homes.
This scenario should raise a couple of red flags:
In addition to asking questions, these red flags are a signal to pay special attention to the client’s identification. Some tips include:
See LawPRO’s Real Estate Scams Fraud Watch for additional information and tips on corporate real estate fraud.
Corporate identity theft is also increasingly common.
Let’s look at another example:
In these cases, the fraudsters will often have filed a Notice of Change of Directors for a corporation. They will pose as the new directors or officers, using fake identification to do so. They will retain a lawyer to help them mortgage the corporation’s property. Again, private lenders are often involved in these mortgages.
Red flags to watch for here are:
See Recognizing the red flags of real estate scams involving corporate identity theft for additional information and tips on corporate real estate fraud.