In an identity fraud, a scammer poses as a property’s owner or as an attorney acting under a power of attorney. Also, two scammers working together may impersonate both individuals. Generally, a scammer, posing as an owner, either secures mortgage financing or sells the property and pockets the proceeds. In either case, the scammer usually asks you to wire the funds. Once the scammer receives the mortgage funds or proceeds of sale, they disappear.
There are also reports of MLS-listed properties where a scammer, posing as an owner, creates a fraudulent separate advertisement to sell the same property and be paid with virtual currency such as bitcoin. Unwary potential buyers may see the MLS listing and think that the fraudulent listing is just another way of marketing the property. Be cautious of transactions in which a purported owner will accept virtual currency for the purchase price. In addition to ensuring that the seller is the actual owner, such a transaction will have unique legal issues that are not dealt with in common standard contract of purchase and sale agreements.
Common Characteristics of an Identity Fraud
These are common characteristics of identity fraud:
- The fraudster tries to convince you that there is a plausible reason why identification cannot be produced (e.g., it was stolen; left in another town).
- The fraudster uses you or someone else in the firm for some other smaller transaction (e.g., a will or an incorporation) and thereby induces you into believing you know them.
- The name of your client is not identical to the name on the title, but the client convinces you it is “close enough”. For instance, there are many Robert Smiths in Saskatchewan, and Robert Smith very well may not be Robert F. Smith.
- The borrower or owner is not the registered owner of the property, but a power of attorney is being used.
- You are asked to contact the client exclusively through a cell phone, or somehow all the communication is being “managed” by the client.
- You are asked to send documents to an address other than the one shown on the title even though the client claims to live there.
- A transfer document is presented to you apparently validly witnessed by another lawyer, and yet you are being used to complete the transaction.
- No fire insurance is being placed on the premises.
- The deal must be closed quickly.
- Where property is jointly owned, only one owner shows up and asks to have the mortgage financing put on that owner’s half interest.
- Where property is jointly owned, only one of two owners has identification.
Tips on Fighting Identity Fraud
Here are some tips to fight identity fraud:
- Understand and follow the Client Identification and Verification Rules
- Get picture identification from all the owners (unless you are absolutely certain of the identity of the clients through your personal knowledge).
- Keep a copy of the identification in your files (front and back if applicable).
- Give only the assurances you can to the lender.
- Be wary of powers of attorney or deals that must be closed urgently.
- As in value fraud situations, remember that you may be considered to be acting for one of the parties and the lender if financing is involved. Be sure to follow all Code provisions, including advising parties that there cannot be confidentiality among them, then advise the lender of the odd circumstances surrounding the mortgage loan and get further instructions from the lender documented in writing before proceeding with any advance. Document that advice in your file, which will go a long way toward allowing you to tell both clients all salient information. If for any reason you feel that you are compromised in your ability to discuss the information with the lender, contact a staff lawyer at the Law Society to discuss the best way to proceed.
- Take steps to protect against corporate identity fraud (i.e., a fraudster posing as authorized signatory):
- obtain your own corporate search; don’t rely on the client’s copy;
- obtain picture identification just as you would for an individual signing on their own behalf;
- if giving a solicitor’s opinion, don’t make an assumption as to the genuineness of signatures;
- satisfy yourself that proper corporate authority is given to the signatory and that any requirements in the bylaws or resolutions regarding multiple signatures are met;
- Remember that corporate resolutions and other minute book materials can be faked, and you may need to investigate further to confirm accuracy.