Legal professionals critical partners in fight against devastating crime
This article was produced in partnership with Stewart Title Guaranty Company (Canada)
Last year title fraud made headlines across Canada. The stories involved individuals and members of organized crime groups using high-quality, forged identification to fraudulently sell or mortgage properties and steal millions of dollars. Vacant, tenanted and mortgage-free properties, as well as elderly and other vulnerable individuals were the most targeted. Although media attention has moved on, title fraud remains. Fraud Prevention Month provides an opportunity to revisit how we can fight back against this crime and why the legal professional’s role in real estate transactions is more essential than ever.
Most fraudulent real estate deals involve impersonation
Title industry losses as a result of title fraud have surpassed an estimated $100 million over the last three years. At Stewart Title, we manage policy orders for thousands of transactions each month, giving us valuable insight into this issue. As new claims and title fraud attempts emerge, our Underwriting Team must adapt to evolving criminal schemes and implement practical and proactive measures around detection and prevention. While we look at many key indicators to spot a bad deal, impersonation is the leading issue.
Legal professionals continue to be targeted by individuals claiming to be legitimate vendors or borrowers. This places a tremendous amount of pressure on law firms to have many checks in place--even after a deal has passed through the mortgage broker, realtor and lender. As gatekeepers of the transaction, legal professionals play a critical role in safeguarding the integrity of the real estate deal and that should not change.
Increasingly sophisticated technology continues to enable really good fake ID
The incidents of identity fraud have risen, and it now ranks among the top three reported frauds of 2023. Verifying the identities of those involved in real estate transactions therefore remains vitally important. Unfortunately, advancements in technology and easy access to personal information online have enabled criminals to produce fraudulent IDs that can pass as genuine. To combat this, security identifiers are regularly added to government IDs (the current Canadian passport has 26) but staying up to date on these measures and knowing what to look for during a visual inspection can prove challenging for legal professionals.
Recognizing that identifying fraudulent ID is one of the most effective ways to stop criminals, law societies and regulatory bodies have been issuing new guidelines around the authentication of ID. In response, many law offices have adopted new tools and processes to help protect their practices and clients. When legal professionals actively engage in title fraud prevention, it benefits everyone involved in the real estate ecosystem.
Stewart Title’s response to combatting title fraud
Title insurance policies safeguard against a multitude of risks, including losses from many forms of title fraud. While this coverage can eventually provide relief to affected parties, it is essential to recognize that for property owners and their lenders, falling victim to title fraud can be devastating and extremely stressful--a situation they would undoubtedly prefer to avoid, despite the availability of insurance coverage.
In this regard, Stewart Title dedicates substantial resources to detection and prevention efforts to stay ahead of potential risks and mitigate title losses. These efforts include continually adapting underwriting protocols, delivering regular employee and client education, and proactively communicating red flags and other alerts.
To further strengthen our title loss prevention efforts, in 2021, we acquired an interest in Treefort Technologies, an Edmonton-based company that specializes in identity verification and authentication (IDV). It had become apparent that legal professionals needed a robust tool that they could count on to verify and authenticate client identity. As long-time supporters of the profession, the addition of Treefort IDV to our technology stack was a natural fit.
Treefort’s IDV product uses Multi-Factor Authentication (MFA) technology to verify and authenticate client identity, while remaining compliant with professional KYC requirements and regulations. To date, Treefort’s technology has successfully detected tens of millions of dollars in potential title fraud.
Legal professional expertise remains a vital component
Evolving technology will continue to drive criminal activity, but also provide opportunities to combat it. How these opportunities are embraced and integrated alongside the expertise of legal professionals will play a significant role in the future of law practices. A combination of implementing MFA technology, recognizing transactional red flags and making reasonable inquiries can help you contribute to the prevention of title fraud, protect your professional reputation and reaffirm your integral role.
Thank you for your valuable and ongoing partnership. By combining our expertise with yours, we can work together to protect Canadians and safeguard real estate transactions.
Marco Polsinelli is the President of the Canadian Division for Stewart Title Guaranty Company, a leading global provider of title insurance. Under his leadership, Stewart has become a trusted partner to many stakeholders in the real estate industry looking for expertise, innovative products and technical solutions.
