Be aware when transferring house purchase money

An increasing number of solicitors and conveyancers are warning their clients of the dangers associated when transferring money to purchase a property. David Burrows, marketing manager at Lawyer Checker, explains how you can avoid being hacked by email fraudsters who are stealing thousands of pounds from unsuspecting home buyers

With billions of pounds being moved daily for property purchases, and mortgage fraud occurring one in every 300 transactions, according to credit reference agency Experian, it is no surprise that the conveyancing industry, and unsuspecting house purchasers, are being targeted by criminals.

Conveyancing is an industry where large amounts of money changes hands and the process can be quite lengthy. It often requires numerous email exchanges between you and your law firm. As it is an infrequent activity and a bit of a mystery for most of us, it makes it hard to see the warning signals.

There is a growing threat from borrower’s funds being misappropriated/stolen at the time your solicitor or licensed conveyancer transfers the funds for your house purchase to that of your seller’s law firm. The largest sum lost (so far) by a purchaser is an eye-watering £735,000.

With thousands of law firms carrying out conveyancing in the UK it is impossible for any given law firm to “know” the law firm who is acting for the other side at any given time.

Example of some recent attacks on law firms and their customers include the following:

• Criminals stealing letter-headed paper and writing to clients asking them to send their house purchase deposits to false bank accounts.
• Setting up fake law firms who pretend to do conveyancing.
• Employee “insider” fraud.
• Intercepting emails between conveyancers and their clients.

As a result law firms are increasingly being asked by customers how they can guarantee the protection of their money when it is transferred.

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Case study 1: Customers lose proceeds of sale funds

Paul and Ann Lupton sold the flat they had bought for their daughter for £340,000.

Two days before the set completion date Mr Lupton’s solicitor, Perry Hay & Co in Richmond, Surrey, emailed him requesting his bank account details for the sale proceeds to be paid into.

Mr Lupton duly replied, sending his Barclays bank account number and sort code.
The email was intercepted by fraudsters, possibly using technology that “X-rays” millions of emails to identify patterns of data that could contain valuable financial information.

Posing as Mr Lupton, the fraudsters swiftly emailed Perry Hay & Co again – from the same email account – and told the firm to disregard the previous details and send the money to a different account instead.

The sale completed as planned and the solicitor sent the funds intended for the Luptons, worth just over £333,000 after fees and charges, to the criminals’ bank account.

A few days later, Mr Lupton called the solicitors to chase the payment and the crime was discovered. Both parties contacted Barclays and the police.

Barclays was the account provider for all three involved: the solicitors, the fraudsters and the Luptons. The account was frozen and £271,000 was returned to the Luptons, still leaving them £62,000 out of pocket.

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Case Study 2: First-time buyers lose their deposit

Sarah and Richard Tough were buying a three-bedroom home near Bishop Stortford.

The couple received an email from their conveyancer asking them to transfer their deposit. A few days later on Thursday 17 December 2015 they received another claiming to be from their conveyancers Advantage Property Lawyers informing them their bank accounts were changing due to an audit.

They duly transferred the money to the new account. However on Monday, Sarah contacted Advantage Property Lawyers who told her the money had not arrived, and the second email was not from the law firm.

Sarah then contacted the new bank, Barclays, whose fraud team managed to claw back £22,000 but the remainder of the deposit has been lost.

As a result the Toughs lost their £45,000 house deposit after transferring money to a bank account fraudsters had told them belonged to their conveyancers.

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Top tips to avoid being conned

So how can you avoid losing your hard earned savings or equity to fraudsters? Here are our top tips:

• Before you appoint a conveyancer ask what checks they have in place to prevent you and them being scammed.
• Ask your law firm if they are making a detailed check on the seller’s solicitor and where they are transferring the money to. For £10 plus VAT Lawyer Checker will check the account number of the seller’s law firm against a database of previous conveyancing transactions. The results provided by the service will help to better assess the risk associated with sending your money. In some cases the solicitors will cover the cost.
• Transfer £1 to your conveyancer and check they have received it before transferring the remaining amount.
• Be alert to the fact that emails coming from your solicitor could be hacked into especially if they advise there has been a change of bank details. That should start alarm bells ringing.
• Treat emails containing attachments or hyperlinks (particularly shortened links) with caution.
• A static website, with minor spelling mistakes and a mobile phone as the main form of contact can suggest that the website has been cloned.

Sophisticated cyber criminals

Over the past five years we have seen numerous firms face scrutiny around risk management, and particularly for the threat of cybercrime, from their insurers. We always advise firms to make their processes, and of course their use of Lawyer Checker, clear to clients.

Government security service Get Safe Online, which offers advice on protecting against fraud, said cyber criminals have become increasingly sophisticated.

Tony Neate, head of Get Safe Online, said: “In the cases highlighted [in this article], the user would have had no idea that their emails had even been intercepted by a criminal or that the money had been fraudulently hijacked. It goes to show the importance of protecting online accounts in as many ways as possible.

“Your first line of defence for your email account is a strong password that is different to other online accounts and is changed regularly. Protecting your devices with security software and regularly installing updates will also help.”

The Solicitors Regulation Authority said its member firms were responsible for safeguarding client funds and must replace any money that was “improperly withheld or withdrawn from a client account”.

Lawyer Checker provides risk management solutions to the conveyancing industry and its service can help to combat the risk of fraudsters intercepting transactions to steal funds. Its Account & Entity Screen provides a quick check so firms can see whether or not a client account they are sending funds to has a track record of successful use within conveyancing.
Ask your conveyancer if they use Lawyer Checker.