This article discusses in detail about the consequences, when a conveyancing solicitor knowingly or unknowingly involves himself in a Mortgage fraud transaction. It also has guidelines that serve as warning signals for a solicitor that the process is doubtable.
This occurs when an individual cheats the lender through a mortgage. This can happen in two ways; the borrower may exaggerate his income to obtain a higher mortgage loan, or forges the signature of co-owner (or the real owner), or does not reveal the true price at which the property is bought. Sometimes mortgage frauds are committed in a large scale and involve the use of multiple properties etc.
Needless to say, the rule of law must be upheld in all such instances, and precedence should be given to maintaining professional integrity over confidentiality. Failing to report such instances of fraud, is a breach of the SRA Code of Conduct. The conveyancing solicitor shall be liable for criminal prosecution besides being reprimanded for misconduct. A civil case can also be initiated by the lender for the negligence. In fact, provisions under the Proceeds of Crime Act 2002 state that a solicitor is liable to be prosecuted under the charges of money laundering even if he transfers the money obtained through fraud.
A Mortgage Fraud Practice Note is in place to help conveyancers detect warning signals and protect themselves and their firm. In instances where the conveyancing solicitor represents both buyer and lender, there shall arise a conflict of interest, when the lender has agreed to pay the amount, but the buyer does not want the solicitor to disclose the amount to the lender. In such an instance, the client must stop acting for both, as he is obligated to lender client as well as the buyer client to maintain confidentiality.
Such a duty of confidentiality to the buyer client is discharged only when the conveyancing solicitor is satisfied that the buyer client is involved in any fraud or other criminal activity. If this is the case, the solicitor must inform the lender, the local police or the Serious Organised Crime Agency. And if it is not illegal, the solicitor should decline to act for both parties citing professional restrictions.
There is a Practice Note titled Property and Registration Fraud to help conveyancers identify warning signs on fraudulent, criminal, and money laundering activities. One can always seek advice from the SRA’s Professional Ethics Helpline.
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