Property and registration fraud
It was hoped that the new Confirmation of Payee (COP) system introduced by the banks would ensure that payments went to the correct payee. It’s clear from some cases we have seen that if the name of a firm is used with some other additions made at the end of it and the fraudsters have opened the account in this name, then the confirmation of payee provisions do not protect against fraud.
The Confirmation of Payee (COP) to tackle circa £320 million a year lost from this fraud and protect victims is currently only applicable to the six largest banks:
- Lloyds Bank Group
- Royal Bank of Scotland Group
- HSBC Group (excluding M&S Bank) and
- Nationwide Building Society
This was delayed from July 2019 to 31 March 2020 and now with COVID-19, the Payment Systems Regulator (PSR) has deferred any action against banks meeting the deadline until 30 June.
We understand this is an issue that the AML and Economic Crime team are working on through the newly established cross-sector public-private partnership fraud groups.
We've recently updated this practice note. The changes include:
- highlighting the continued threat of fraudsters targeting the properties of both individuals and companies. We have issued this practice note to assist conveyancers in encouraging their clients to be more aware of how they may protect their property interests against fraud and safeguard their rights as legitimate property owners on the register (Dreamvar confirms that solicitors can be held liable for any losses caused by acting for a fraudulent party)
- clarifying that a written risk assessment should be carried out at the start of the transaction and be updated and amended as the details of the transaction become known
- reaffirming the importance of undertaking thorough anti-money laundering checks (signposting existing Law Society, HM Land Registry and Legal Sector Affinity Group guidance where appropriate)
- regulatory updates to reflect the new SRA Regulations that came into force in November 2019
Fraud and fraudsters targeting the properties of both individuals and companies continue to be a threat to conveyancing transactions.
This joint practice note will assist you when acting in property transactions.
It may also help you to encourage your clients to be more aware of how they may protect their property interests against fraud and safeguard their rights as legitimate property owners on the register. This is important because Dreamvar confirms that solicitors can be held liable for any losses caused by acting for a fraudulent party.
This advice is not exhaustive. Many aspects of mortgage fraud can also be adapted to commit title fraud. For further information, see our practice note on mortgage fraud.
Firms should also be aware of their anti-money laundering (AML) obligations as these may help protect the firm and clients against fraud.
For further information, see the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and Legal Sector Affinity Group guidance.
This practice note is the Law Society’s view of good practice in this area, and is not legal advice. For more information see the legal status.
Who should read this practice note?
All solicitors who carry out work involving conveyancing and HM Land Registry (HMLR) applications.
What is the issue?
Fraud and fraudsters targeting the properties of both individuals and companies continue to be a threat to conveyancing transactions. This activity often includes the presentation of forged identity and other documents to solicitors and/or HMLR for registration. As far as possible, HMLR brings these matters to the attention of the public and has issued information to assist with this.
This joint practice note will assist you when acting in property transactions. For the purpose of this practice note, ‘property’ means any land or interest capable of registration under the Land Registration Act 2002 (LRA 2002).
It may also help you to encourage your clients to be more aware of how they may protect their property interests against fraud and safeguard their rights as legitimate property owners on the register (the register of title, except in the context of cautions against first registration (s.132 Land Registry Act 2002)). This is important because Dreamvar confirms that solicitors can be held liable for any losses caused by acting for a fraudulent party.
The Code for Completion by Post is a process to follow when completing a property transfer that does not take place in person. The Code can be used for completion of residential or commercial transactions.
The revisions aim to make it clearer that the seller’s solicitor only gives undertakings where there’s a genuine sale. This should give innocent purchasers greater protection from fraudsters – which should help boost consumer confidence in the conveyancing process.
Fraud prevention and detection should not be approached on a ‘tick box’ basis although a checklist might be helpful. Fraud methods vary and evolve continually, and practitioners should diligently look out for anything which may be unusual or suspicious which may point to possible title fraud. Appropriate further investigation or queries should be raised in these circumstances. Practitioners should look at each transaction as a whole. It will rarely be the case that one factor alone will betray a fraudulent transaction. In most cases it’s a matter of looking at all aspects of the case together and taking an informed view on the likelihood of fraud and the appropriate measures to be deployed to guard against it.
In March 2018, the Legal Sector Affinity Group (LSAG), which includes the Law Society and all the legal sector supervisors named in the anti-money laundering regulations, published guidance on anti-money laundering (AML).
The guidance considers the changes introduced by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. This guidance replaces the our AML practice note.
Nothing in this joint practice note is intended to override or depart from the LSAG’s anti-money laundering guidance which has been approved by HM Treasury.
This joint practice note is also not intended to impose any additional obligations on solicitors when undertaking customer due diligence beyond those contained in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (AML Regulations) (as amended) and the LSAG’s anti-money laundering guidance.
Solicitors should adhere to the guidance contained in the LSAG’s anti-money laundering guidance at all times when conducting AML customer due diligence.
Solicitors and others seeking to prevent fraud are always playing catch-up. As alerts are circulated and practices are introduced to prevent one type of fraud, criminals devise a new scam or a different variation of an existing one.
Fraud is also cyclical. Criminals will revert to old methods of fraud which have previously been detected, but not used for some time, and as a result have slipped from the collective memory.
In much the same way as AML requires an overall risk assessment so a similar assessment should be carried out for fraud during which a firm identifies the type of work with which it regularly deals, and the risks associated with it. Matters falling outside the norm must immediately be considered higher risk as the firm may not have in place the necessary procedures to minimise that risk.
It’s important to distinguish between the risks for fraud as opposed to the risks associated with AML. A transaction may be low risk for AML but high risk for fraud and vice versa.
Regular staff training is essential to help fee-earners and relevant support staff identify fraud risk factors and understand the steps required to minimise them. Staff must understand the key fraud risk factors in property sales and purchases which make the transaction higher risk.
A written risk assessment should be carried out at the start of every transaction and kept on the file. Some matters may be initially identified as low risk, but the fraud risk level may change if the terms of the transaction are altered.
Continual monitoring is essential, and the risk profile should be checked immediately before contracts are exchanged to ensure that the risk profile remains the same.
Fraud threats for property transactions
Those proposing to carry out frauds may seek to impersonate anyone in a conveyancing transaction including:
- conveyancers (a solicitor, a licensed conveyancer within the meaning of s.11(2), Administration of Justice Act 1985, a Fellow of the Institute of Legal Executives (r217(c), LRR 2003), a barrister (r217(d), LRR 2003), a duly certificated notary public (r217(e), LRR 2003), or a registered European lawyer (r217(e), LRR 2003)
Impersonation of conveyancers
Those proposing to carry out fraud may purport to:
- be a conveyancer in their own right, or
- work for an authorised practice
A conveyancer is defined by Rule 217A of the Land Registration Rules 2003 which sets out which legal professionals are entitled to make applications to HMLR. The definition includes:
- licensed conveyancers
- legal executives
If you do not know the conveyancer acting for another party in a matter you must check their details to help assess the risk of fraud.
When a person claims to be a conveyancer you should consider the following to ascertain whether that is correct:
- Is the name of the signatory an identifiable registered individual within a conveyancing practice?
- Are they registered with an appropriate professional body (although this is not the only enquiry on which you should rely)?
- For solicitors, check our Find a Solicitor website but do not rely on this alone. You should carry out further checks on the SRA’s website or through their contact centre on 0370 606 2555, Monday to Friday from 8am to 6pm
- For licensed conveyancers, check Find a CLC Lawyer in England and Wales on the Council for Licensed Conveyancers website
- For legal executives, check the CILEx Authorised Practitioners Directory on the Chartered Institute of Legal Executives website
More information is provided in our Conveyancing Handbook under 'Dealing with non-solicitors'.
Impersonation of conveyancing firms
There have been instances where applications have been made to HMLR by fraudsters impersonating legitimate firms of solicitors using and/or attaching forged headed paper, faxes and emails.
Conveyancing firms can be impersonated by the use of fake letterheads copied from real firms or by the setting up of fraudulent websites and/or new sub-offices of legitimate firms. False email addresses are often created with a single letter or symbol difference from the email address of the genuine firm.
Check with the professional bodies noted in section 3.1 for details of the firm or legal practice and whether it has any sub-offices. Anything unusual should be investigated further.
As well as checking the individual and the details of the firm or legal practice you could consider verifying their bank details (for example through Lender Exchange) or transmitting a small sum first as a test before sending funds or accepting undertakings from another conveyancer on exchange or at completion.
It’s possible that your firm name or its headed paper could be forged or used fraudulently by a third party, or even a member of your staff. If you receive communications from HMLR, relating to an application where you’re unable to identify the client name, the property or the application reference, you must contact HMLR by email to email@example.com or by phone on 0300 006 7030, Monday to Friday from 8.30am to 5pm.
You must seek evidence from your client which shows a clear and sufficient connection between them and the property you have been instructed to sell. You should check that the evidence provided is consistent with the information on the open electoral register.
Most fraudulent activity falls into distinct categories:
- intra-family/associate frauds which are perpetrated by family members, friends or business partners
- opportunistic frauds, for example where tenants or those who have access to tenants are able to divert post to perpetrate fraud
- third party frauds that constitute 'organised crime' (two or more people involved in continuing significant illegal activities; such a group is capable of defending its members with violence, coercion or corruption; and more than £1m in criminal proceeds has been generated)
Although there may be entirely valid reasons for the following examples, some client contact details may suggest an increased risk of fraud, such as:
- where the only contact details provided for any party are a mobile number and/or an email address
- where you’re instructed by and meet only one party to the transaction, and only have contact with the other party by post, telephone or email
- where the address of the client is not the subject of the transaction or changes mid-transaction
If you’re presented with utility bills particular care should be taken because of the ease of forgery of these documents. Ensure that:
- the utility bills are for the seller and for the property being sold
- there are no obvious typographical errors within the bill and that the bill looks authentic in all other respects
- there are no alterations or evidence of alterations in downloaded utility bills
If the seller does not reside at the residential property you have been instructed to sell, you must ask further questions. You may find it helpful to ask your seller client the following questions, although positive answers to them will not guarantee that the ‘seller’ is the genuine owner of the property:
- Do they have an insurance policy in their name for the property?
- Do they have invoices for repairs carried out to the property?
- Do they have the original plans for any planning permission or building regulation approval?
- Is there any other documentation or information not publicly available that you might expect an owner of a property to have, even if they do not live in it?
Continue throughout the transaction to look out for anything which is suspicious or unusual. Regard with suspicion and beware of changes:
- in the client’s contact details or the client’s bank account to which the sale proceeds will be sent
- the risk profile as the transaction progresses
- inconsistencies between information from the client and information from elsewhere, for example pre-contract enquiries from the buyer and an increase in errors as the matter progresses
You must record all the information in your customer due diligence file together with your reasoning as to whether you accept that the client has a connection with the property they are purporting to sell.
Vulnerable registered owners
The SRA Standards and Regulations 2019 require you to take account of clients’ attributes, needs and circumstances. This might include making special provisions for vulnerable clients.
HMLR has identified that certain categories of owners may be more susceptible to registered title fraud. These types of owners often own properties without a legal charge and attempts are made to sell or charge their property by use of identity fraud.
Clients particularly at risk from this sort of fraudulent activity include:
- a sole owner
- elderly owners who are in hospital or have moved into a care home
- owners living abroad
- owners no longer living in the property as the result of an acrimonious break up with a partner
- owners whose property is empty
- owners whose property is let
- an owner who has already been the victim of identity fraud
- deceased owners and/or personal representatives responsible for a property where the property is to be sold
Family members are also at risk of impersonation. You must ensure that you’re instructed by and meet face to face all registered proprietor(s) or persons otherwise involved in the transaction and carry out ID checks in the usual way. Where this is not possible you’ll need to take appropriate additional steps to satisfy yourself as to the identity of your client.
You should satisfy yourself that the actual person will have received your correspondence or call and keep copies of the ID documents in your customer due diligence file (see further at section 4.7 below), as this evidence might be called for by HMLR as part of an application.
HMLR has also identified that certain types of properties, whether residential or commercial, may be particularly vulnerable to transactional and registered title frauds, some of which are similar to those situations noted above, including:
- unoccupied properties
- tenanted properties
- high value properties without a legal charge
- high value properties with a legal charge in favour of an individual living overseas
- properties undergoing redevelopment
Keeping addresses up to date
In order to minimise risk where there are vulnerable registered owners or vulnerable properties encourage your clients to follow HMLR advice to registered proprietors to keep any addresses they have registered for service at HMLR up to date. See Form COG1: Update registered owners' contact address.
Clients intending to leave their property empty for a significant period of time, for whatever reason, should consider registering some other address(es) for service in addition to the property such as an email address that they will be able to access while they are absent from the property.
Overseas clients present more difficulty in customer due diligence, but the need for vigilance remains. In the case of individuals, your customer due diligence checks must at least establish:
- their address and contact details
- adequate proof of who they are
Whilst not a specific requirement under the AML regulations, one way of helping to establish the client’s identity to the requisite standard would be to obtain a notarised copy of the client’s passport and proof of their address and ask the notary to have those documents legalised or have an apostille added.
In the case of a corporate customer’s due diligence checks:
- you must establish that the corporation exists as a legal entity and who are the relevant officers of the company (plus the person you are dealing with has authority to act on behalf of the company)
- you should require confirmation of that information from an independent lawyer (not an in-house lawyer) in the relevant jurisdiction who is a member, and entitled to practice as such, of a legal profession in that jurisdiction and who certifies details of the company’s incorporation and its powers to carry out the transaction
You’ll have to apply enhanced customer due diligence measures if your overseas client is established in a high risk third country. A high risk third country is one that has been designated by the European Commission under the Fourth Money Laundering Directive. You will also need to apply enhanced customer due diligence measures if a higher risk of money laundering or terrorist financing is present.
Mitigating fraud threats
It’s important to be aware of risk factors and to take active steps to mitigate these otherwise you could be responsible for fraud in the following circumstances:
- properties owned by vulnerable owners (section 3.4)
- vulnerable properties (section 3.5)
- when you’re pressed about the urgency of transaction
- where there’s a possible undervaluation of the property
- there exist some other reasonable grounds for suspecting there is property fraud within your transaction
- where you have limited or conflicting client contact details
You should be aware that exercising reasonable care in viewing documents intended to establish identity may not conclusively prove that the person or company is the person or company they are purporting to be.
It may also not be possible for you to conclusively establish that such person or company either is or is entitled to become the registered proprietor of the relevant property.
Even where you’ve followed usual professional practice the court may hold that the steps taken exposed someone to a foreseeable and avoidable risk and amounted to a breach of duty of care.
Conveyancing transactions are a regulated activity under the AML regulations. You must therefore take steps to:
- identify and verify your client by independent means
- identify and, on a risk-sensitive approach, verify any beneficial owners
- obtain information on the purpose and intended nature of the business relationship
This last requirement means more than just finding out that the client wants to sell a property. It also encompasses looking at all the information in the retainer and assessing whether it’s consistent with a lawful transaction. This may include considering whether the client is actually the owner of the property they want to sell. See the SRA’s warning notice on money laundering and terrorist financing.
If an electronic ID check is made which requires further investigations to be carried out (for example, it has not passed the check or is marked ‘Refer’) those enquiries should be carried out promptly and fully in all circumstances to establish and ensure confidence in the claim of identity.
If acting for the seller and you’re concerned about the seller’s identity you should consider whether you can continue to act and whether you need to refer the matter to the SRA, Action Fraud, NCA and/or HMLR.
When acting for the seller, review or establish policies in relation to how and in what circumstances you will answer questions from the buyer’s solicitors relating to ID. You should also comply with AML regulations and the LSAG’s anti-money laundering guidance. This provides information about the enhanced due diligence required if you do not meet the client face to face (see section 4.12). You should keep a record of any steps you take.
If the documentation you receive as a buyer’s solicitor raises a possible concern about fraud, consider raising queries. You should carefully record your concerns, the enquiries you raise, the answers you receive and the reasons for the decision you then reach. If you are not fully satisfied you must report your concerns to your buyer-client and, where there is one, your lender-client.
Address for service at HM Land Registry
Clients need to ensure their address for service is always up to date and can be directed to HMLR for further information. The following are available from HMLR:
- Form COG1: Update registered owners' contact address
- Protect your land and property from fraud
- Property Alert Service information
You should advise clients intending to leave their property empty for a significant period to register other address(es) for service at a place where they can be reached.
You should not give the address of your firm as an address for service unless you’re confident that you’ll be able to contact your client immediately should you receive notification from HMLR. Such a notice may not be received for many years after the conclusion of a purchase of a property and you’re unlikely to know whether the client has moved and therefore whether you hold up-to-date contact details for them.
HMLR notices usually require a response within 15 days which may cause difficulties if the address for service is outside the jurisdiction. An email address may ensure HMLR communications reach clients even when they are away from their properties, or where post is at risk of interception.
People proposing to commit fraud have been known to change the address for service registered at HMLR as a precursor to fraud. Since July 2008 HMLR has inserted an entry in the register indicating whether the registered proprietor has changed their address for service to alert people to the change. For example, the entry may state:
The proprietor's address for service has been changed.
If you see this entry on your client's register and you are not aware of the reason for it, you should view this with suspicion and enquire with your client why it was done. There may be an innocent explanation, but if your client's explanation is suspicious, you should make further investigations.
Owners of ‘at risk’ properties may wish to register for free a restriction using From RQ for individuals or Form RQ(Co) for corporate owners or a non-standard restriction (which bears the usual fee for a restriction), to protect the property by an entry appearing on the register of the appropriate title. This action, however, does not guarantee the prevention of registered title fraud.
In addition to establishing a connection to the property, other factors you may consider include:
- Have you met your client face to face?
- Have you seen the original identity documents or only copies? If you have a certified copy then you need to check that the person whose name appears on the document as the certifier has actually certified the documents, and secondly, that they hold the qualification which they claim, for example, in the case of another solicitor, check Find a Solicitor. Check that the certifier has attested to the authenticity of the documentation and the likeness of the individual.
- Is the registered proprietor's date of birth inconsistent with their being the owner?
The date appearing immediately before a proprietor's name in the proprietorship register is the date of registration of that owner, for example:
(13.10.1970) PROPRIETOR: JOHN SMITH and JANE SMITH
In this example the proprietors have been registered since 1970 and must have been at least 18 at that time. Consequently, if, in cases where you’re seeing the client face to face, the person presenting the identification information appears too young, this may be a case of impersonation.
Simple steps such as ensuring that documents for a transaction are executed by clients in the presence of you or your staff can help reduce fraud.
Some seller fraudsters have pretended to be buyers only to withdraw from a transaction after receiving the report on the property. When presenting to another firm as the seller, they will appear to know more about the property than might be expected of a fraudster which makes verifying identity and checking for changes during the transaction important.
Exercising reasonable care in viewing documents intended to establish identity may not prove that the person or company is the person or company they are purporting to be.
You must record all the information in your customer due diligence file (see further at section 4.7 below) together with your reasoning as to whether you accept that the client is who they purport to be. This may include the results from certain electronic verification services.
Where the registered proprietor is a company, a company search may reveal a date of incorporation inconsistent with it being the owner, for example, a search at Companies House indicates the company was incorporated after the registered proprietor was registered as the owner. If this is the case the company is unlikely to be the legitimate owner (the rightful claimant to the land or the interest in land whose rights require protection, which could include someone with the right to apply for first registration; a registered proprietor; a registered proprietor of a charge; or someone with the benefit of an interest such as a notice or restriction. See LRA 2002 for definitions).
A discrepancy without a legitimate reason may be a risk factor requiring further investigation.
You should also pay close attention to the company registration number specified in the proprietorship register and make sure it matches that of the company instructing you. An Industrial and Provident Society that has converted to a company registered under the Companies Acts would be an exception to this.
Since January 1999 HMLR has been entering the company's/corporation's country of incorporation in the proprietorship entry. In some cases, this will also include the state or province of incorporation, for example ‘incorporated in Delaware, USA’. This information appears in the register immediately after the corporation's name.
If an overseas company has a registration number issued by Companies House because it has a branch or place of business in the UK, that registration number is also included in the proprietorship entry as follows:
'Proprietor:- NORDDEUTSCHE LANDESBANK GIROZENTRALE (incorporated in Germany ) (UK Regn. No. FC012190) of: ...'
HMLR started routinely entering the territory of incorporation in 1999.
Check if both the registered proprietor and the ‘seller’ are registered companies in the same jurisdiction. If not, registration abroad of a company with a similar or the same name, registered in the UK, may be undertaken in order to commit fraud and vice versa.
Where no place of incorporation and no UK company number are noted on the register, you may be able to establish the date of incorporation of the seller by making a search at Companies House. Those search results may also assist in assessing the risk of company impersonation.
Verification of the identity of an overseas company is likely to require confirmation from a qualified lawyer authorised in the country of incorporation. See HMLR Practice Guide 67: Evidence of identity: conveyancers.
The precautions suggested are examples only and do not constitute an exhaustive list. You should take such precautions as you deem fit depending on the circumstances of the transaction.
Where a party is unrepresented and you’re unable to confirm in Form AP1 that sufficient steps have been taken to verify that party's identity, HMLR requires you to provide certified identification information obtained by you or another conveyancer in respect of that party. This is explained in HM Land Registry Practice Guide 67 Evidence of identity: conveyancers.
Obtaining identification information at an early stage in the transaction may avoid difficulties or delays at a later stage. You should keep a record of the steps you take. These may assist you if HMLR or other bodies contact you to make enquiries.
Identity document provisions
You should be aware of the provisions relating to identity documents in the following documents:
Enhanced due diligence
Where you do not see a client face-to-face, consider whether you should undertake enhanced due diligence. For further information see section 4.12.1 of the LSAG’s anti-money laundering guidance.
Non face-to-face transactions increase the risk of fraud and these risks may be mitigated in the ways set out in paragraph 4.1 of the SRA Code of Conduct for Firms 2019 (SCCF).
In order to protect or to mitigate risk for you and your firm, you must keep a contemporaneous record of the steps you take, including the reasons why you took a particular decision and the consideration you gave to risk.
HM Land Registry
Freedom of Information Act 2000
Wherever possible HMLR tries to assist law enforcement agencies and regulatory bodies with the prevention and detection of fraudulent activity.
Law enforcement agencies means:
- the Commissioners or any other government department
- the Scottish Administration
- any other person who is charged with the duty of investigating offences or charging offenders, or
- any other person who is engaged outside the United Kingdom in the carrying on of activities similar to any carried on by the National Crime Agency (NCA) or a police force
(Section 3(4) (a) of the Serious Organised Crime and Police Act 2005).
HMLR is bound by the provisions of the Freedom of Information Act 2000 (FOIA 2000) which embodies a general principle of transparency in relation to the disclosure of information within government departments. This means that requests for information, which may relate to your particular application or the conduct of your account with HMLR, may be received from third parties.
Following a FOIA 2000 request, if HMLR has reason to believe disclosure of the information would, or would be likely to, prejudice the prevention or detection of crime, or the administration of justice, then under the provisions of section 31 of FOIA 2000, HMLR will consider whether the issue of such information is in the public interest. If HMLR considers such disclosure is not in the public interest the request may be refused under section 2(2)(b) of the FOIA 2000.
If a person is dissatisfied with a refusal of their request, an application can be made to the Information Commissioner for a decision under section 50 of the FOIA 2000.
Where HMLR considers such a disclosure to be in the public interest it will supply the information requested to the law enforcement agency or other body/person requesting it.
HMLR may require further documents or evidence (including ID evidence) or may give any necessary or desirable notice under rule 17 of the Land Registration Rules 2003 as a means of verifying information about certain transactions. This enables HMLR to stop processing an application while further enquiries are made, or law enforcement agencies notified where necessary.
Schedule 8 of the LRA 2002 provides for the payment of indemnity for loss suffered by reason of (among other things) the rectification of the register and certain mistakes in the register.
Under paragraphs 5(1)(b) and 5(2) of Schedule 8 of the LRA 2002, no indemnity is payable if the loss is wholly as a result of the claimant's lack of proper care and any indemnity will be reduced if the loss is partly as a result of the claimant's lack of proper care.
HMLR may seek to limit its indemnity in certain circumstances where it considers that the conveyancer failed to make reasonable checks in relation to identity. There’s case law which establishes that a lack of proper care by a conveyancer will be attributable to their client, and may therefore lead to a reduction in any indemnity payable to the client.
Paragraphs 6.3-6.5 SRA Code of Conduct for Solicitors 2019 (SCCS) and SCCF deal with confidentiality and disclosure and your obligations when considering whether disclosure to a third party is necessary or appropriate. In particular, paragraph 6.3 SCCS and SCCF sets out the fundamental duty that the affairs of your client(s) and former client(s) must be kept confidential except where disclosure is required or permitted by law or the client/former client consents.
Paragraph 6.4 (a) SCCS and SCCF describes the exceptional circumstances when disclosure of confidential information is required or permitted; for example, where statute requires disclosure to specific government or other bodies, or in order to comply with Proceeds of Crime Act 2002 (POCA 2002) and the AML regulations, or where the solicitor's conduct is under investigation by the SRA or the Solicitors Disciplinary Tribunal.
Where disclosure may be permitted or required by law, you must ensure that you understand the scope of your obligation in the absence of the client's specific consent, for example, by considering the relevant provisions of the statutory power, and whether privileged information is protected from disclosure.
You should only provide such information as you’re strictly required by law to disclose. Disclosure of confidential information which is not authorised by your client or by the law could lead to disciplinary or civil action against you.
Duty of confidentiality
The duty of confidentiality is not applicable if the retainer with the client is tainted by fraud. Confidentiality does not apply to information acquired by a solicitor where they are being used by a client to facilitate the commission of a crime or fraud, because that is not within the scope of a professional retainer. You should judge the likelihood of such an occurrence in the light of your client's explanations and any other relevant factors.
The SRA has issued a warning notice on money laundering and terrorist financing which highlights warning signs of suspicious transactions of which you should be aware and which may require you to take action in order to avoid committing a criminal offence or breaching your professional obligations under the SRA Handbook.
In relation to legal professional privilege, the SRA has issued guidance on reporting and notification obligations.
You should consider notifying HM Land Registry if you identify a registration fraud. If you’re acting for a victim of fraud or someone you believe is a victim of fraud you should consider notifying HM Land Registry at the earliest opportunity subject to the other obligations set out in this section 6.
If, after careful consideration of your professional obligations, you have evidence that you or someone else has been a victim of a fraud or that someone is attempting to commit a fraud, you may also decide that it is in the public interest to report that fraud. See section 8.5 for contact details.
HM Land Registry
If you’re acting for a victim of fraud or someone you believe is a victim of fraud you should consider notifying HMLR at the earliest opportunity subject to the other obligations set out in this paragraph.
Money laundering and disclosure to the National Crime Agency
If you know or suspect that a fraud has been committed and a person is in possession of criminal property, you must consider the provisions of POCA 2002.
Criminal property is property that:
- constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and
- the alleged offender knows or suspects that it constitutes or represents such a benefit (Section 340(3) of the POCA 2002)
The person in possession of the criminal property does not have to be your client and you do not actually have to be involved in the transaction. In those circumstances you must still consider sections 330-332 of POCA 2002 and whether you need to make a disclosure to your firm’s money laundering reporting officer (MLRO) to avoid committing an offence.
The MLRO will then need to consider whether to make a disclosure to the NCA by submitting a Suspicious Activity Report (SAR). In deciding whether to make a disclosure to the NCA the MLRO must first consider whether the crime/fraud exception to legal professional privilege applies. See chapters 6 and 7 of the LSAG’s anti-money laundering guidance.
While a required disclosure to the NCA may avoid the commission of a money laundering offence; it is not a crime report. You may need to make a separate report about the fraud to law enforcement agencies. See chapter 10 of the LSAG’s anti-money laundering guidance.
You should consider implications regarding the offence of 'tipping off' under POCA 2002 if you’ve included information about the making of a Suspicious Activity Report in reporting the fraud to law enforcement agencies. While the provision of this information to such bodies is not required by law, a key element of the offence of tipping off is the likelihood of prejudicing an investigation.
This risk is small when disclosing to law enforcement agencies, or to an appropriate person at HM Land Registry. There is also a specific defence of making a disclosure for the purposes of preventing a money laundering offence.
If, after careful consideration of your professional obligations, you have evidence that you or someone else has been a victim of a fraud or that someone is attempting to commit a fraud, you may also decide that it is in the public interest to report that fraud.
Read more about money laundering offences and tipping off offences in chapter 6 and how to make a report to the NCA in chapter 9 of the LSAG’s anti-money laundering guidance
HMLR's rights of recourse
HMLR has statutory rights to recover money it has paid out by way of indemnity. Under paragraphs 10(1)(b) and 10(2)(a) of the LRA 2002 it is entitled to enforce any right of action, which a person to whom it has paid compensation would have had, if that person had not been indemnified.
Similarly, under those same paragraphs, it is entitled to enforce any rights of action which a person in whose favour the register has been rectified would have been entitled to enforce if the register had not been rectified. The registrar may have a right of recourse against a conveyancer under either head.
HMLR's policy is not to seek recovery from a conveyancer who has not been at fault, even though there may be circumstances where, strictly, it would have a right to do so.
You should consider whether you’ve complied with the terms of your retainer and other professional obligations. For example, have you given any undertakings to secure the signature of a particular named person?
You should also consider if you have given any warranty to a party to the transaction (other than your client) that you have the authority to act for a person in the transaction.
Legal and other requirements
- Land Registration Rules 2008 (as amended)
- Land Registration Act 2002 (as amended)
- Land Registration Rules 2003 (as amended)
- Fraud Act 2006
- The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
- Proceeds of Crime Act 2002 (as amended)
- UK Finance Mortgage Lenders’ Handbook for conveyancers
Law Society publications
- Legal Sector Affinity Group’s anti-money laundering guidance
- SRA warning notice: money laundering and terrorist financing
- Conveyancing Checklists, 3rd Edition
- Solicitors and Money Laundering: A Compliance Handbook, 4th edition
- The Conveyancing Handbook 26th Edition
- Law Society’s practice note: Mortgage Fraud
- Law Society National Conveyancing Protocol
- Law Society’s Cybersecurity and GDPR news (email sign-up)
- SRA money Laundering and terrorist financing – Suspicious Activity Reports warning notice
HM Land Registry guides
Practice Advice Service
We provide support for solicitors on a wide range of areas of practice. Practice Advice can be contacted on 020 7320 5675 from 9am to 5pm on weekdays.
HM Land Registry
Contact HMLR on firstname.lastname@example.org or by phone on 0300 006 7030, Monday to Friday from 8.30am to 5pm.
The Law Society and HMLR have worked in close collaboration on the production of this joint practice note.
Practice notes represent the Law Society’s view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them but doing so will make it easier to account to oversight bodies for your actions.
Practice notes are not legal advice, and do not necessarily provide a defence to complaints of misconduct or poor service. While we have taken care to ensure that they are accurate, up to date and useful, we will not accept any legal liability in relation to them.
For queries or comments on this practice note contact our Practice Advice Service.
There are seven mandatory principles in the SRA Standards and Regulations which apply to all aspects of practice. The principles apply to all authorised individuals (solicitors, registered European lawyers and registered foreign lawyers), authorised firms and their managers and employees, and to the delivery of regulated services within licensed bodies.
Must – a requirement in legislation or a requirement of a principle, rule, regulation or other mandatory provision in the SRA Standards and Regulations. You must comply, unless there are specific exemptions or defences provided for in relevant legislation or regulations.
Should – outside of a regulatory context, good practice, in our view, for most situations. In the case of the SRA Standards and Regulations, a non-mandatory provision, such as may be set out in notes or guidance.
These may not be the only means of complying with legislative or regulatory requirements and there may be situations where the suggested route is not the best route to meet the needs of a particular client. However, if you do not follow the suggested route, you should be able to justify to oversight bodies why your alternative approach is appropriate, either for your practice, or in the particular retainer.
May – an option for meeting your obligations or running your practice. Other options may be available and which option you choose is determined by the nature of the individual practice, client or retainer. You may be required to justify why this was an appropriate option to oversight bodies.