Help Protect Your Clients from Title and Mortgage Fraud Attempts
CATEGORY: Practice Tips
TAGS: Anti-Money Laundering Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) Home Title Identity Fraud Identity Verification Mortgage Fraud Suspicious Transaction Report Title Insurance
Recent reports of home title and mortgage fraud cases in Ontario have raised questions about what real estate professionals across Canada can do to help protect their clients from similar fraud attempts.
On January 5, 2023, law enforcement officers in Toronto warned the public of two fraudsters who impersonated the owners of an Etobicoke-area home and hired a real estate agent to list the house for sale. The property was then sold to unsuspecting buyers, and the new homeowners took possession. Several months after the sale of the property, the real homeowners discovered that their property was sold without their consent.
So, how does the scheme work? And what can REALTORS® do to help protect their clients from similar fraud attempts?
What is Title and Mortgage Fraud?
The word "title" is used to describe someone's right of ownership to land. Title fraud is when the title of someone's home is stolen.
Title and mortgage fraud can take on many different forms. The perpetrators are sophisticated and leverage modern technology to their advantage. In the Ontario cases, organized crime groups allegedly used stolen identification, hired “stand-ins” to pose as tenants to gain access to the homes and impersonated homeowners to mortgage or sell them, according to a CBC Toronto investigation.
Here in BC, existing safeguards, such as the land-title registry system, make title fraud more difficult to commit.
According to the province’s Land Title and Survey Authority, there have been three reported attempts at title fraud in the past three years, out of approximately three million submissions.
Although we have not seen a proliferation in title fraud claims in BC, there’s an array of best practices REALTORS® can leverage to help protect their clients from similar fraud attempts.
What Can REALTORS® Do to Help Prevent Fraud Attempts?
Home title and mortgage fraud may impact both homebuyers and homeowners. In these situations, innocent parties on either side of the transaction can fall victim to the crime.
When engaging with new clients, REALTORS® are expected to exercise due diligence to ensure the people they are working with are whom they claim to be and have the authority to sell.
Being able to demonstrate that you have exercised due diligence to verify the information provided by your clients can go a long way to protecting your reputation in the sector, the interests of your clients, and the reputation of the REALTOR® profession.
For more information on fraud prevention best practices, please refer to BC Financial Services Authority’s January 26, 2023 communication, Licensees Can Help Prevent Fraudulent Real Estate Transactions.
Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its Regulations, REALTORS® have an important role to play in screening their clients, which includes identifying persons and entities.
Verifying identity is a foundational element of Canada's anti-money laundering and anti-terrorist financing regime and a key component of client relationships. It helps you to understand and assess any risk that may be associated with their transactions or activities. The importance of identity verification at the onset of the relationship cannot be understated.
There are several methods to verify the identity of a person, according to Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) guidelines.
Additionally, third-party identification and verification tools are available to assist REALTORS® and compliance officers in confirming the identity and the authority of their clients. Typically, these tools feature software technology, such as facial recognition and computer-assisted risk assessment, that can help REALTORS® validate document authenticity.
To mitigate risk, REALTORS® are encouraged to advise their clients to explore title insurance for added protection. Title insurance is an insurance policy that offers protection against losses associated with coverage, such as survey issues, title defects, as well as title fraud. The extent of coverage may vary based on region, policy type and the insurance provider.
Although title insurance can’t prevent your clients from becoming a victim of fraud, it can protect them from many of its associated consequences and the resulting stress.
Protecting the Integrity of Real Estate Transactions
REALTORS® play a crucial role in safeguarding British Columbians in the entire homebuying and selling journey. If you have reasonable grounds to suspect someone may be engaged in identity fraud, you can file a Suspicious Transaction Report (STR) with FINTRAC.
For more information on the suspicious transaction reporting process, please refer to FINTRAC’s guidelines on STR.
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