Vendor identity fraud is more common than it should be, yet many agents still have not implemented prevention procedures to protect themselves. Here are REINSW’s tips to ensure you know who your vendor is and whether they have the right to sell the property.
- Read the guidelines
NSW Fair Trading’s Real Estate Fraud Prevention Guidelines outline a clear set of procedures to protect agents from vendor identity fraud. The Guidelines are designed to protect agents against people claiming to be legitimate vendors. You should familiarise yourself with the Guidelines.
- Confirm identity
You should verify the vendor’s identity from an original photographic document, such as a current driver’s licence or passport. Alternatively, the vendor’s identity may be verified by way of two secondary non-photographic document (original or certified copies), such as a current Medicare card, credit card, electricity bill or rates notice. When confirming the vendor’s identity, always do so in a face-to-face environment.
- Fill in the checklist
The Real Estate Fraud Prevention Guidelines include a Proof of Identity Checklist for Vendors . You should complete this straightforward checklist with every vendor and ensure the relevant details are carefully recorded.
- Keep the checklist on file
Once filled in, place the completed Checklist on the sales file. This ensures it is readily available in the future should Fair Trading request inspection.
- Confirm legal ownership of the property
You must verify the ownership of the property from an original or certified copy of a primary property ownership document, such as a certificate of title or document conferring the power of sale. Cross check these details against the verified identity of your vendor.
ATTENTION: Property managers
While NSW Fair Trading put the Real Estate Fraud Prevention Guidelines in place to help sales agents confirm the identity of vendors, they are equally applicable to property management.
The REINSW Helpline recommends that, as a matter of best practice, property managers put the same proof-of-identity procedures in place to verify the identity of landlords.
- Exercise “reasonable skill, care and diligence”
While the Guidelines are not obligatory and agents are not legally required to run through the Checklist with every vendor, they are required to exercise “reasonable skill, care and diligence” under Rule 4 of Schedule 1 of the Property, Stock and Business Agents Regulation 2003. If you’re found to have not taken due care to protect your clients from fraud, then there are a number of penalties that may be imposed by Fair Trading. These include everything from conditions on, to the suspension of, your Real Estate Licence. Fair Trading may also choose to impose a fine. In addition, there is the risk of civil litigation by the vendor or buyer.
- Implement processes
While the Guidelines may seem to be adding an extra layer of paperwork, it is essential to implement processes at your agency to ensure the procedures set out are implemented to protect against vendor identity fraud.
- Always verify
It may be slightly awkward to ask longstanding clients or people you know to supply documentation to confirm their identity, but this doesn’t match the embarrassment of falling victim to fraud or receiving a penalty or fine. Be sure to verify the vendor’s identity in every instance.
- Only deal with the verified vendor
Once you have verified the vendor’s identity, deal only with them (or their properly appointed representative) going forward and have procedures in place to ensure this is the case. For example: have security questions in place; always check signatures against originals held on file; use only postal and email addresses known to be genuine; and don’t use new contact details until verified through correspondence via the original contact details.
- Heed warning signs
Always be alert to warning signs. These may include: requests for funds to be sent to a different bank account; advice that the sale is urgent; transactions involving people located overseas or documents issued abroad; the use of generic email addresses (like Hotmail or Gmail); and changes in address or other contact details.
You can download a copy of the Real Estate Fraud Prevention Guidelines and Proof of Identity Checklist for vendors at fairtrading.nsw.gov.au