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Ontario embraces new client verification measures to combat fraud, enhance security in real estate

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Recent new client verification requirements for real estate lawyers in Ontario are good news for the industry, say experts.

Tim Hudak, CEO of the Ontario Real Estate Association (OREA), puts this into context: “Stories of homes being sold without the owner’s consent are extremely troubling – I cannot imagine coming home from a vacation and finding that your entire home has been illegally sold and taken away from you. My heart goes out to the honest, hardworking people who have dealt with this and had their trust and sense of security broken as a result.”

 

OREA supports identity verification requirements and processes

 

As such, he explains that OREA supports the Law Society of Ontario (LSO)’s requirement to have lawyers who only meet with clients virtually verify those clients’ identities online by authenticating their identification documents or using an alternate, approved verification method.

Title insurers are establishing processes specifically for real estate lawyers to verify their client’s identity and authenticate their identification documents. 

“These new processes, along with title insurance, will go a long way towards protecting Ontario realtors, their clients and real estate lawyers from title fraud. Ontario realtors want to work with law enforcement, lawyers and financial institutions to put these thieves permanently out of business and reinforce a sense of security for homeowners. I urge our members to continue being vigilant and exercise further due diligence in order to protect themselves and their clients from title fraud,” Hudak stresses.

 

Key difference between clients identifying themselves and lawyers verifying their IDs

 

At the recent Ontario Bar Association’s Ontario Legal Conference, Safiyya Vankalwala of LAWPRO (Lawyers’ Professional Indemnity Company) spoke about the new requirements in a session called What’s New in Real Estate? 

She says there’s a difference between a client identifying themselves and lawyers verifying their ID.

“A client identifying themselves is them telling us what is their name, what is their business address, their home address, their phone number and occupation … But if there is receipt of payment in the transfer of funds, then there are further requirements,” Vankalwala explained during the session. 

 

New Law Society of Ontario requirement: Verify clients’ identities online

 

By-Law 7.1 requires lawyers to follow certain client identification and verification procedures when retained by a client. The By-Law also requires lawyers to keep a record of the information and documents obtained to identify and verify the identity of clients, according to LAWPRO. 

As of January 1, the LSO requires lawyers who only meet with clients virtually to verify their clients’ identity online by authenticating their identification documents or using an alternate, approved verification method. This ends the emergency virtual verification measures that permitted verification through simply viewing identification documents online. The virtual authentication of identity is done via technology that does multiple searches/verifications of the client’s identity, the LSO said.

 

“Fraud has increased and fraudsters have become incredibly sophisticated”

 

When meeting a client online and verifying their ID, Vankalwala says lawyers must authenticate the document to make sure that it’s “authentic, true, current and valid.”

“I think most of the authentication technology uses biometric technologies to take a picture of the client or a live video and then say ‘yes this is the person’,” she says. “Fraud has increased substantially. It’s actually tripled in the last few years and it makes sense. COVID was terrible, but a silver lining is we can do things online …  We can meet our clients virtually. But fraud has increased and fraudsters have become incredibly sophisticated.”

 

Impact on real estate lawyers

 

Karen Yolevski, Royal LePage’s chief operating officer of corporate brokerages, notes the new requirements impact real estate lawyers who are great partners with realtors.

She says realtors work together with lawyers, as well as other industry stakeholders, to get transactions completed and to prevent fraud.

“This is good news in terms of fraud prevention which is a stain for the industry. No one wants fraud. Fraud is not good for any stakeholder in the industry. So this is good news and welcome news that there’s an additional tool in the lawyer’s toolkit to help with identification,” adds Yolevski.

“You hear a lot about fraud when it happens because it’s such a severe outcome. Fraud isn’t actually the component of a large number of files, but when it happens you tend to hear about it because the consequences are severe. We’ve heard stories, for example, of people fighting to get their title back to their homes, or mortgage fraud where someone’s taken out a large sum of money against the house when it wasn’t their right to do that.”

 

Know who you’re dealing with: An important part of the process

 

Cameron Forbes, chief operating officer/broker of Re/Max Realtron Realty in the GTA, says the Toronto area will get the odd situation where you hear about people who own a home and it’s been almost sold out from under them.

“A fraudulent third party has taken on their ID and has sold the property. It’s very rare. I think the lawyers, the financial institutions, the title insurance companies (and) the real estate industry have done a lot of things to prevent that. So I don’t think it’s happening often by any stretch of the imagination,” he says.

“But it’s an important part of the process for real estate agents and brokerages to ensure they know who they’re dealing with and, generally speaking, we do that face to face and very rarely virtually. We’re supportive of the lawyers making sure that they’re identifying people, obviously taking an extra step for these virtual situations.”

 

The LSO’s new client identification and verification requirements can be found here

 


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