Protecting Mortgage Brokers and their Clients from Fraud

When you are part of an industry as complex and diverse as the mortgage market, it can be all too easy to believe you’re part of a broad discussion that includes all key stakeholders, when in fact, you’re sitting in an echo chamber.

Particularly when you are part of a business to business community, remembering the consumer – other than in a generic ‘consumer experience’ sense – can come nearer the bottom of the list of priorities than it should.

It’s why the latest figures from the Financial Ombudsman Service, which revealed that customer complaints about banking scams and fraud ballooned by 43 per cent last year, made me sit up and think. While these complaints refer to services and products across financial services – from payday loans to insurance, to pension transfers and authorised push payment fraud – the significant uplift in their numbers is telling.

As we move to a more digital world, where online banking becomes the norm and customers expect to be able to conduct transactions online without interacting with paper or person from start to finish, the propensity for fraud rises. Scammers have got smarter and smarter, and stories of families and professionals who have signed away their life savings on the false assumption that the transaction was kosher are becoming increasingly frequent in our national media.

Technology makes it both easier and harder for scammers, who no longer have to look their marks in the eye as they walk off with their life savings. Digital safeguards may be available to protect individuals, but we are still learning about how to interact with technology – many of us still use one password for every online account we have, for example.

Authorised push payment fraud, where a customer authorises the transfer of their funds to a third party, but then the money disappears and the transaction turns out to be a scam, is becoming more sophisticated. And it was this type of fraud that was the driving factor behind last year’s overall rise in complaints.

Many people tend to think of payment transfers as relating to investments, but home purchase is typically the single biggest money transfer any of us is ever likely to make in our lifetimes. Fraudsters are already on it – as conveyancers are only too aware of. Email hijacking, where fraudsters assume solicitors’ identities and persuade clients to transfer hundreds of thousands of pounds to accounts that are then closed after the money is removed, has become rampant.

Protecting house transactions from fraudsters is an issue of paramount importance.

Reassuringly, ULS recently carried out a survey of our partner conveyancers and found that almost half of firms are overwhelmingly thinking about how to protect their clients – and their businesses – from fraud. Some 45 per cent of the firms we asked cited fraud as the biggest concern for their business, more than double the number of firms concerned about business volumes in 2019.

Within this umbrella term of ‘fraud’ exists a number of concerns: data breaches is a big one, clients’ identities being stolen and used to transact fraudulent purchases, and email and communication hacking.

It’s a fact that far too few conveyancing firms have cyber insurance – particularly when we know many firms use email for between 60 and 90 per cent of their day to day communications. One wonders what level of encryption they have available to them for client communications via email and whether any of their PI cover mitigates this kind of risk.

So what’s the answer? How can we protect both consumers and ourselves – as well as our commercial partners – from the damage wreaked by fraud?

There is work being done across the industry, by lenders, mortgage networks and hubs, trade bodies and regulators. We are also doing our part – our work on our mobile digital solution, ‘DigitalMove’ is just one example – and listening to the firms we work with about what they need to see change in the industry to improve cyber security. We are now well into pilot and the benefits of a user friendly secure platform such as DigitalMove are immediately apparent to those trialling the system.

Our research has highlighted there are two big moves conveyancers want to see over the coming months: digital signatures and secure communication platforms.

The former should help to reduce ID fraud and increase firms’ risk cover; the latter, should massively cut the risk of email hijacking and clients inadvertently transferring funds to scammers’ bank accounts.

While there is still some way to go on delivering digital signatures, rest assured that work is underway to deliver a far more secure environment for conveyancers and clients to interact in the near future. At ULS technology, we’re working tirelessly to deliver this.