The name of this article comes from an old school friend who is giving his inaugural lecture on cyber fraud in September and it caught my attention.
Cyber fraud is now at the order of the day and is the cause of substantial amounts of money lost by innocent victims. Unfortunately the real estate environment (and the legal fraternity as part of this environment) has been the latest focus.
When a purchaser makes an offer to purchase a property, the standard pre-printed document contains (amongst other things) stipulations regarding when the deposit is due, when the balance is due and when financing should be approved. That same pre-printed document provides space for both parties’ personal details. The seller’s names, id number, contact telephone numbers, email addresses and existing home loan account number must be furnished. The purchaser similarly provides personal information and contact details and also where he would be applying for finance. Once the seller accepts the offer a valid agreement of sale comes into existence. The agreement is then filed with the estate agency, furnished to the institution which will deal with the financing application, sent to the conveyancing attorney and both parties. All of this personal information is now in cyber space.
Practically, this is how you are caught:
The purchaser receives a phone call from someone pretending to be the transferring attorney. He is told that banking details will be sent to him via email in the next couple of minutes. The email is then sent from an address that looks the same as the real conveyancer eg. firstname.lastname@example.org whereas the correct address is email@example.com. Very difficult to pick up. The banking details will then have Greyvensteins Trust account as the account name, but with a number that belongs to a fraudulent account – usually opened online. Unfortunately the account name and account number are not automatically matched. The purchaser, who is led to believe that the account details are correct as a result of the account name, then pays the money over. When he is presented with the correct details, the money is long gone and the fraudulent account closed.
It is of vital importance that no money is ever paid over until you have had a chance to personally verify the transferring attorney’s banking details. Purchasers are cautioned to wait for the consultation with the transferring attorney in order for them to present him with the correct pro-forma statement and banking details.
Attorneys cannot take out any form of insurance to safeguard clients against cyber fraud as our professional insurance only covers us in the case of negligence. A payment into a wrong and fraudulent account constitutes negligence on the client’s behalf. What makes matters worse is that in a case where a part of the purchase price has been paid into a fraudulent account, the purchaser remains liable to the seller for payment of the full purchase price.