The F Word: Protecting Yourself and Your Clients from Fraud #554
CATEGORY: Legally Speaking
TAGS: business email compromise Fraud identity fraud Impersonation
Have you heard of the Instagram influencer Hushpuppi also known as the “Billionaire Gucci Master,” who turned out to be a Nigerian con artist who is currently awaiting sentencing in US jail? You may not be familiar with Hushpuppi, but you should be familiar with the hallmarks of business email compromise fraud and other identity fraud that may come up in your practice. A determined fraudster will look for any weaknesses in your business processes to gain access to confidential information. Fraudsters can then use that information to misappropriate funds, leaving innocent parties and hoodwinked professionals to cover the loss.
Opportunities for fraud may increase when business is conducted electronically, as opposed to face-to-face. For example, scanned copies of identification documents such as passports or driver’s licenses can be fraudulently altered much more easily than physical copies. Such falsified identification could then be used to effect the fraudulent transfer of funds or even of title to a property. A March 2021 Vancouver Sun article discusses such a situation.
According to the article, a fraudster contacted the property manager, impersonating the overseas owner of the property and providing instructions. The fraudster presented a scanned copy of a forged passport to verify the supposed owner’s identity. A real estate agent and a conveyancing lawyer both accepted the forged passport, and the property was listed and sold with the sale proceeds being transferred to the fraudster.
It may be impossible to fully protect against the ever-evolving tactics of sophisticated fraudsters, but there are steps REALTORS® can take to minimize the risk of being the victim of, or unknowingly participating in, fraud. It is important to follow FINTRAC identity verification requirements, and for brokerages to have clear and thorough processes in place for their REALTORS® to follow. These can include situations where REALTORS® are dealing with:
- requests such as changes of contact information for a client, especially if the client lives abroad,
- clients whom you cannot meet face-to-face,
- clients who are not the sole owner named on title, whether they are spouses, family members, or individuals holding powers of attorney for the named owner,
- individuals purporting to represent a corporate client.
REALTORS® should be cautious when dealing with clients who express urgency, contact you at unusual times, or provide unusual instructions such as listing a property for sale for below market value, or not posting “for sale” signage nor posting the property on MLS®.
Civil liability might not always follow, whether because the actual owner eventually endorses the actions of the person purporting to be them, or who is acting on their behalf; or because title insurance or the Land Title and Survey Authority of BC may compensate the rightful owner for their losses.
However, professional discipline consequences can be significant. Licensees found to have breached their duties to act in the best interests of their clients in such circumstances have been subject to orders ranging from thousands of dollars in penalties and enforcement costs to a 30-day suspension. Such penalties have been imposed in situations where a licensee failed to conduct a title search before having a client sign a listing agreement when it turned out the client was not the person on title1; and in situations where once it was determined that the individual the licensee was dealing with was not actually the registered owner, the licensee failed to take steps to verify that an individual had the legal authority to sell the property2.
|1||Kong (Re), 2011 CanLII 63098 (BC REC)|
|2||Chiang (Re), 2018 CanLII 59402 (BC REC); Uy (Re), 2018 CanLII 64967 (BC REC)|
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