10 April 2014
Last updated at 10:14
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Looking out for fraud within conveyancing
A wake up call for conveyancers and lenders alike as landmark case redefines s.61 Trustee Act conveyancer responsibilities. Chris Harris, director of Lawyer Checker, explains.
Lenders have to rely on conveyancers to safeguard their interests. Unfortunately, fraudsters often use a solicitor, or fraudulently identify themselves to be a solicitor, as a mechanism at the core of the fraud to direct and reassure other professionals.
We are living in the age of the vendor conveyancer fraudster. In the face of a conveyancing market that has become plagued with fraud, the Law Society set up the Conveyancing Quality Scheme (CQS) in order to provide a recognised quality standard for conveyancers.
Is this enough? It is the concern of lenders that firms adhere to good practice management standards in addition to the expectation of being careful and prudent conveyancers with efficient procedures.
It is the aspirations of the Law Society that the scheme will create a trusted community amongst conveyancers and this trust will in turn deter any wannabe fraudsters. The CQS will most certainly aide this sentiment, but it is not enough.
A lender will be better reassured where they can ensure conveyancing fraud prevention is something that a firm and its conveyancers administer themselves.
Recent case
Most recently, in the Court of Appeal case of Santander UK v R A Legal Solicitors, the lender appellant secured a pivotal victory where relief from the breach of trust finding, in the form of s61 of the Trustee Act 1925, was refused.
The ruling turned on its head a trend of judgments finding in favour of insurers, this time supporting the claims of the lender. The implications for the residential conveyancers are significant.
The Court of Appeal judgment will undoubtedly be gratefully received by lenders. This case effectively states that the burden of proving the conveyancer acted “reasonably” is on the defendant and it should take into account all elements of reasonableness in its broadest term not just whether the loss would have not occurred “but for” the conveyancing failures.
Tracey Carr from Santander commented: “This judgment is important not only for Santander, but for the entire lending and conveyancing industries. After the disappointing initial ruling, we were determined to take the matter to the Court of Appeal. Needless to say, we are delighted with this ruling.”
Implications
The practical implications of the Court of Appeal’s judgment on the lending industry are significant. It will act as a welcome confidence booster; the decision means that conveyancers must now place a great deal of importance on the maintenance of high standards within their sector - in particular, to prevent, as far as possible, fraudulent activity from taking place.
Jenny Owen of Lawyer Checker commented: “This case swings the pendulum back against the conveyancer requiring conveyancers to be able to demonstrate that at every stage they have acted reasonably. It will also encourage the residential conveyancing sector to ensure the integration of efficient and effective checks. Checking the firm on the other side must be part of demonstrating that you have acted reasonably.”
Lawyer Checker
This is the very reason I implemented the risk management capabilities of the Lawyer Checker service. The check of an account number is so very simple, but it is undeniably effective in the battle against vendor conveyancer fraud.
Lawyer Checker is a secure web-based service allowing conveyancers to include an Account and Entity Screen on the firm and account number to which they are sending funds to. This serves as a further aide to lenders who can be assured that their conveyancers are doing their upmost in a bid to detect fraudulent behaviour and trends.
As time goes on the capabilities of Lawyer Checker are only set to increase for the positive. In fact, as recently as last month, the Solicitors Regulation Authority (SRA) released its report ‘Spiders in the Web’ a full week earlier than intended due to a scam email being sent out under the guise of it being generated by the SRA itself. Amongst the many findings within the report was the frightening figure of a 57 per cent rise in attempted frauds on the general public.
By giving conveyancers the access to checks such as Lawyer Checker, lenders therefore naturally have access to better data, pulled together in a single, flexible, web-based system.
This is not to say that the adoption of conveyancer fraud technology, like Lawyer Checker, shouldn’t be seen as a replacement for the CQS. Far from it. Instead, it is designed to work alongside the CQS, rather than competing with it.
In today’s market it is ever more important to limit any acrimony felt between lenders and conveyancers. Performing stringent checks on the accounts of conveyancers/law firms will demonstrate to the FCA that conveyancers and lenders are serious about collaborating in a bid to get tough on third party fraud.
To find out more about the Lawyer Checker Service, available from PSG, click here.
Source: http://www.mortgagefinancegazette.com/
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