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- Detecting Identity Fraud
Why would someone who owns their property, free and clear, require a mortgage from a high interest private lender?
Due to recent incidents of identity fraud in Calgary, it is important to investigate this question if your newest client is such a borrower. The fraudsters first identify properties with no mortgages on title. They then obtain false drivers’ licenses in the names of the owners and apply for a private mortgage through a mortgage broker. The interest rate is typically higher than what they would obtain from a chartered bank. You should question why someone who has so much equity would need to resort to high interest financing.
The reason for the loan may seem to make sense. The purported borrower may, for example, say they wish to complete property renovations. When the borrowed funds come in, they may want you to write the cheques to two different contractors on their behalf. You should question why the full amount of the proceeds are going to contractors before the job has even started or before completion.
If you are acting for a borrower who is seeking to refinance unencumbered property, one of the simplest ways to prevent fraud is by paying special attention to the identification the borrower presents.
Some common tips are:
- Since 2009, drivers’ licenses have been made of polycarbonate, which creates a unique sound when dropped on-end onto your desk. This metallic sound is different than the sound your credit card makes when dropped.
- Check the security features on the client’s license by holding it up and comparing it to your own, as well as referring to the proofing guidelines available on Service Alberta’s website. If you are obtaining licenses from two clients, look at and compare the drivers’ license numbers – no two licenses will have the same number.
- Hold the license up and compare the photo to the individual.Pay attention to the stated age of the license holder, as it appears on the license. Does the client’s appearance match the age on the license? Is the client old enough to have owned the property for the number of years stated on the title?
- Get to know your client. Discuss why the client is borrowing the funds. Comply with the Law Society of Alberta guidelines for identifying and verifying your client’s identity. Keep a copy of the license on file, and magnify the copy to 200% so that you can better read some of the detail.Ask for secondary sources of identification – credit cards, car registration, utility bills, etc. How many forms of identification can your client produce? Does the ID look worn or brand new?
- Most people will not have their ID handy and have to go into their wallet or purse to get it when you ask.Does your client have their ID already in hand, before you ask?
Taking these simple steps may help you prevent identity fraud. For additional information, refer to the Alberta operator’s license proofing guide.
LawPRO also publishes a Fraud Fact Sheet.
If you have questions or concerns, the Practice Advisors are always available to answer your inquiries.
Written by: Nancy Carruthers, Practice Advisor