During my year as president, mortgage fraud has been a recurrent issue. We have consistently provided support to members affected by changes in panel terms and conditions, and have worked to influence the approaches of lenders.

Be assured, however, that the Law Society, as the representative body, has no interest in supporting those who choose to engage in mortgage fraud to line their pockets. Apart from the resultant losses experienced by lenders and innocent consumers, these individuals tarnish the profession’s reputation. Even so, the reality is that those who knowingly commit mortgage fraud are a very small minority.

Other solicitors who find themselves caught up in mortgage fraud are not active participants, but unwitting third parties who are used by the perpetrators of fraud.

A lack of awareness or intent is no defence. The extension of the definition of fraud in the Fraud Act 2006 and the UK’s anti-money laundering regime can mean that a solicitor will be found criminally liable if their client commits mortgage fraud, even if they are unaware of the fraud. Courts expect solicitors to have a high level of knowledge and education, and do not look kindly on cases where there is evidence that appropriate due diligence was not applied.

Therefore, it is essential that firms do all they can to protect themselves from being used by fraudsters. Education, awareness and vigilance throughout the firm are key. A good starting point is the Society’s anti-money laundering practice note, which provides good practice on meeting the requirements of the Money Laundering Regulations 2007. Many of those requirements will help guard against mortgage fraud, such as:Further steps can be taken by checking the bona fides of other professional parties involved in the transaction; and checking that documents are fully completed before signing and that registration with the Land Registry is completed in a timely manner.

  • endeavouring to verify the identify of the client; and
  • where the client never meets the solicitor face to face, carrying out enhanced due diligence.

Ensuring that staff are aware of the potential warning signs of mortgage fraud is another practical step. Certain scenarios should prompt additional investigation: if the property has been owned for less than six months; the investment is significantly more than the client would usually be involved in; or the deposit is being paid by someone other than the purchaser.

In the current economic climate, having to spend additional time on further checks is, of course, a source of great frustration, but if it means avoiding involvement in mortgage fraud then the investment is worthwhile. More detailed guidance is available in the mortgage fraud practice note. Regional mortgage fraud seminars will also be held in the coming months.

The Society will continue to make representations to lenders on panel membership. We recognise that lenders are free to decide the make-up of their panels. However, we hope lenders will accept that a discerning, risk-based approach to panel management is better than blanket removal of certain types of firm.

There are other elements to consider. It is important that other parties involved in home buying and selling remember that the problems we see now cannot primarily be laid at the door of solicitors. Over-enthusiastic lending practices, the expansion of the buy-to-let market, the removal of a reliance on hard copy title deeds, and changes to Land Registry processes in response to demand for ‘a quicker, cheaper process’ have all had a part to play.

All stakeholders, including the government, must accept that tackling mortgage fraud will have an effect on the speed and cost of the transaction. It is also paramount that this need for caution is not forgotten next time we are in the midst of a property boom.

Robert Heslett is the president of the Law Society