Identity fraud and scams are increasingly prevalent throughout the community, and the property industry is not immune to falling victim to such events.
Two highly publicised incidents in September 2010 and March/April 2011 resulted in properties being sold in Western Australia without the knowledge and consent of the lawful property owners.
These sales were undertaken by real estate agents who were contacted by criminals masquerading as the true owners.
In both cases, the criminals then became clients of settlement agents after an offer to purchase was accepted. A range of communications between the fraudsters and settlement agents then occurred with the entire proceeds of the sale being subsequently disposed to the fraudsters and the transfer of land to the unsuspecting WA based buyer.
What can real estate and settlement agents do?
Agents have a responsibility to ensure that the person they are dealing with is the true owner or person legally entitled to act on the property.
All agents must be particularly vigilant in confirming the identity of owners wishing to sell their properties, particularly when they involve absentee owners and overseas vendors.
To avoid devastating loss it is imperative that settlement agents conduct their own ID checks on owners of property or people acting on their behalf and not just rely on a real estate agent’s referral.
Settlement agents must be particularly vigilant in confirming the identity of owners wishing to sell their properties. It is not necessarily the case that any future property fraud attempts will occur along the same lines as the two recent cases. The fraudster may approach an agent in person requesting the sale and settlement of a property. It may even be that the property to be sold and settled is currently occupied by a person who masquerades as the owner, or alternatively the property for sale is vacant land.
Guidance Note 1
When selling a property an agent confirms he or she is dealing with the legal proprietor as shown on the certificate of title, or the person legally entitled to sell the property.
To ensure an agent is dealing with the true owner when effecting the settlement of a property there are three key elements:
1. Verify the name(s) of the registered owner(s) of the property
Ascertain all the names of the current registered owner(s) from the duplicate Certificate of Title registered with Landgate.
2. Verify the names of the person(s) entitled to deal on behalf of the owner
There will be cases where the person with a legal right to effect settlement of the property may not be the registered owner. These would include but are not limited to: the holder of a power of attorney or enduring power of attorney, an executor, a mortgagee in possession or a person with an appropriate court order.
In this situation, the original or a copy (certified as a true copy of the document) conferring the authority to act on behalf of the current registered owner must be obtained, and where possible, confirm with the current registered owner(s) that the person is authorised to act on their behalf.
3.Confirm each of the person(s) representing themselves as the owners or their properly appointed representatives, are who they say they are
For all transfers executed overseas this will be by following the CIV protocols issued by the Registrar of Titles for transfer documents executed outside of Australia.
Prior to the Registrar of Titles issuing CIV protocols for all other transactions, agents must confirm the identity of each of the owners or the person or persons with the legal right to effect the settlement of a property via a 100 point CIV. The methodology associated with this process is at Attachment 1.
The 100 point CIV should ideally be undertaken face-to-face. In carrying out such checks, agents should sight original documents to verify identity wherever possible.
It is accepted, in some instances, clients are not directly accessible to settlement agents to enable face-to-face CIV. In instances where this is not possible, agents must ensure the documents used by the person or persons to meet the 100 point CIV check are sighted and verified as a true copy of the original, by a suitable independent and verifiable witness.
If agents deviate from this method, then the onus will be on them to prove they have taken and documented reasonable steps to confirm the person’s identity.
These checks must be done as soon as practicable after receiving instructions, and prior to settlement.
Agents should retain copies of all documents obtained in the process of verifying identities and in verifying the authority of a person to act in the sale and settlement of a property.
Guidance Note 2
When dealing with a client, an agent exercises vigilance at all times to ensure they are dealing (and continue to deal) only with the true owner or the person legally entitled to sell the property.
While identity checks are one tool to detect fraud, other measures are necessary. The nature of settlement transactions is such that dealing face-to-face with clients does not occur. Therefore, it is imperative that agents are especially vigilant if the client is overseas or remote.
Steps a prudent agent should take include:
- Correspond only to addresses (postal or electronic) held on file, which are already known to be genuine.
- If a client changes their contact details, confirm new contact details and addresses by corresponding with all original and new contact points.
- Seek original rather than facsimile or scanned/PDF signatures.
- Carefully check signatures of property owners against any original signatures held on file and the previous transfer of land documents, and any major differences should prompt further investigation.
- If doubts about the authenticity of a document arise:
- seek to have it independently verified by the issuing authority;
- contact the Police; and
- do not act if doubts remain.
- When replying to an email, type in the known genuine email address from agency files rather than simply clicking on the ‘reply’ button – an email received may have a hidden address embedded in it.
- During the course of providing a customer service do not inadvertently disclose information or documents with signatures, that might be misused.
Warning signs of a possible fraud a settlement agent should be alert to include:
- The transaction involves people residing, or documents issued from overseas, especially from countries known for scams.
- There is a request for funds to be sent to a different bank account to that previously used by the client (in cases of tenanted properties) - including but not limited to offshore accounts.
- Advice is received that the settlement is urgent for reasons such as to finance a petro chemical plant investment.
- Email addresses being used are generic such as hotmail, yahoo or gmail.
- Communication and or understanding of the land transfer system is not in a style normally expected of an existing owner of property in Australia or the English that is used may be poor.
Guidance Note 3
Documented procedures are in place and are consistently applied to ensure verification of identities for all sales. Additionally, appropriate arrangements are in place to ensure security of documents and privacy of clients’ information.
It is expected agents will have documented processes and procedures to ensure the requirements of the code relating to CIV are met.
Some form of periodic internal cross checking to confirm that these procedures are being routinely applied should also be undertaken and it is advisable to record these processes. Proactive reviews of agents by the Department of Commerce (Consumer Protection Division) will include checks to ensure that appropriate CIV processes are in place and are being adhered to by agents.
Some of the information collected about clients to confirm identities may be personal information. The National Privacy Principles enacted under the Commonwealth Privacy Act 1988 will be applicable to some agents and for others the principles provide guidance on the issues which agents should consider in collecting and managing client information.
Agents may obtain further details from the Office of the Australian Information Commissioner about the Privacy Act implications associated with the collection of personal information of clients. As copies of identification documents will be held by the agent, appropriate security for this information should be in place.
Consumer Protection encourages agents to ensure they have implemented within their businesses, appropriate data management policies and systems so as to enable the collection, storage, security and disposal of sensitive client information in compliance with the National Privacy Principles.
Minimising the risk of property fraud
Knowing what to look for when it comes to real estate fraud can help agents detect and prevent these fraud attempts from being successful.
Action has been taken on several fronts.
- Statutory codes of conduct have been amended for real estate agents (and settlement agents) to require client identity verification (CIV) to be undertaken.
- Landgate has improved identity security through new witnessing and CIV requirements for overseas sellers in the execution of transfer of land documents. A form of caveat to prevent improper dealings has also been introduced.
- Landgate has an identity certification regime applying to all transferors, regardless of where the seller resides.
- All lenders have also been alerted to ensure careful scrutiny before releasing mortgages over certificates of title.
- Client identity verification and other procedures to manage fraud risks was included as part of mandatory compulsory professional development training since 2012.
See the Code of Conduct section below for full copies of the Sales Agents and Settlement Agents guidance notes.
A bogus buyer, who says they’re based overseas, approaches the seller claiming they want to buy the house, unit or land being offered for sale. They may try to convince the seller they have paid a deposit, perhaps by using a stolen or fake credit card or by sending an email linking to a bogus PayPal transaction.
The scammer could appear to ‘overpay’ the deposit and ask you to pay back the overpaid amount by bank or wire transfer. Only when the overpayment has been returned will the seller realise that the deposit transaction has been reversed because it was made with a stolen or fake credit card or never existed in the first place because the PayPal email was bogus.
Alternatively the scammer may request the seller pays a fee on their behalf, supposedly to facilitate the sale in some way. They may claim the fee is to cover taxes related to an overseas transaction or to pay for the release the funds from a holding account.
Whatever reason, the scammer will probably ask for the money to be sent by wire transfer, knowing this method is virtually untraceable. The con artist may however suggest payment via a secure payment system, but provide electronic links which take the seller to a fake version of a legitimate payment system site.
Home or land sellers need to be aware that in a real estate transaction, there should be no reason for the seller to outlay money on behalf of the buyer.
It’s the same for anything you’re selling really. If you’re asked to pay money for shipping fees or taxes by an overseas buyer you should be suspicious.
The whole point of selling something is to make extra cash, not lose money, so be on your guard to online sale scams.
Consumer Protection recently issued a warning to all organisations in WA about ‘man in the middle scams’.
Your agency may receive enquiry phone calls, or emails with links to infect computers, in preparation for the scammers to attack.
Electronic communication will be used to organise a bank transfer you think is going to a legitimate receiver but in reality is being paid into the offenders’ account.
To understand how the fraud works and how to protect your agency read the Real estate bulletin
Further details, including local case studies and prevention tips are at WA ScamNet's Middle Man scam page.