In a recent article, I wrote about real estate fraud cases in Ontario that amount to millions in losses. Fraudsters sold properties they didn’t own and pocketed the funds, while homeowners found out the land title to their homes were transferred to innocent buyers without their knowledge.
As far as I understand, this type of fraud has not yet happened in Manitoba. However, this does not mean that Manitobans should celebrate just yet. Fraudsters are quite active in Manitoba.
Currently, their targets and victims are lawyers.
Fraudsters gain access to law firm email accounts and monitor email correspondence. When a real estate transaction is detected, they create a spoof account that is almost identical to the email being monitored. Once the account is established, they send new instructions to forward the funds to a “new” bank account. They pocket the funds and disappear.
Specifically, one Winnipeg law firm lost $170,000 in December 2022. Another law firm deposited a cheque for $500,000.00 after receiving fraudulent instructions in May of 2022. While an alert bank manager was able to recover some funds, the fraudsters got away with the balance.
This practice, of course, is not limited to Manitoba. Two British Columbia law firms were victims within the same time frame. One of them lost $2 million after sending the funds to a diverted bank account.
In all these cases, had the new instructions been confirmed to forward funds by phone, this would have been avoided. The Law Society of Manitoba is taking great efforts to educate lawyers on these simple checks and balances to avoid more losses.
While it would be easy to fall into the trap of thinking these lawyers were incompetent, having lived through busy real estate seasons when multiple transactions occur each day, I can attest to the fact that we have precious little time to deal with a lot of material. Most people don’t realize how complex real estate transactions can be. Before sending funds, keys or signed title transfers, lawyers must agree on the terms of the exchange. While most of the time these are standard, a surprising number don’t quite fit the standard process. This means taking the time to negotiate additional terms in very tight time frames, whether it be unpaid municipal taxes, or dealing with an open permit at the city are a must.
In each of these above cases, I believe that our professional insurer covered the client losses. However, as this fraudulent trend continues, insurance costs will increase. Title insurers are already publicly discussing the potential consequences of the losses suffered in Ontario. As discussed in my recent article, title insurance companies will either raise rates and/or limit claim amounts, leaving future insurance buyers and fraud victims holding the bag.
In the case of our professional insurer, our fund gets assessed on an annual basis based on claims. It is likely that our insurance premiums will go up, which will undoubtedly lead to higher legal fees.
This increase in cyber fraud also forces us to engage IT companies for security purposes. A firm cannot operate in this climate without a robust security team monitoring emails and storage. I must admit, there are times I simply want to go back to writing and mailing letters and opt out of our online world.
The internet was lauded as a solution to all our problems (maybe not all, but certainly many). Instantaneous information and lightening quick transactions such as bank e-transfers have conditioned us to think that it’s all so easy. However, clever fraudsters find weaknesses in the system. They take advantage of the convenience and exploit our reliance on the convenience.
While I used to believe in the Promise of technology, I am now more skeptical of what it can provide. Despite it making our lives easier, it is also making us more vulnerable. In the 50s, 60s, 70s and 80s thieves had to rob banks or break into your home to steal from you. Now, they can sit in their basements in any country of the world and steal 100 fold more that crooks before.
That said, I also don’t advocate the complete rejection of technology. I rely heavily on my banking app to manage my personal affairs, and I stay connected like never before with my kids on Whatsapp. But we can slow down. We can understand the limitations of technology without getting swept up in its utopianism. When it comes time to deal with major transactions where a lot of money is involved, we can take time to double check everything by phone or by meeting people in person or by videoconference.
Whether we like it or not, technology is here to stay. It will take a collective effort to prevent fraud and that effort will become greater and greater as the risks posed by advances in technology become larger and larger.
In terms of concrete actions, someone once told me, ask yourself: what would your grandmother do? That’s probably a good place to start.
This article is presented for informational purposes only. The content does not constitute legal advice or solicitation and does not create a solicitor-client relationship (this means that I am not your lawyer until we both agree that I am). If you are seeking advice on specific matters, please contact Philippe Richer at 204.925.1900. We cannot consider any unsolicited information sent to the author as solicitor-client privileged (this means confidential).