Nothing, it seems, is sacred in South Africa these days, particularly when it comes to money. Credit cards are skimmed, bank accounts hacked and in the latest scam doing the rounds, funds are being misappropriated from conveyancing attorney's accounts by con artists.
Well thought out and executed, the scam artists target conveyancing attorneys’ bank accounts and transfer the profits of the sale before the money can be paid into the seller’s account. In a report in the Weekend Argus, it was stated that 32 cases had so far been reported and that sums ranging between R45 000 and R488 000 had been stolen from attorneys’ accounts.
While this figure, given the number of property transactions that take place on a daily basis could be deemed to be on the low side, what is concerning is the fact that in all but one instance, the same bond cancellation bank was involved.
The report quoted the head of risk, Nedbank Home Loans, Greg Salter, who confirmed that isolated fraudulent instructions had taken place. "The attorney firms with which Nedbank deals in respect of home loans have all been made aware of the measures that need to be taken to prevent any parties from falling victim to this criminal behaviour," he said. He also said that a forensic investigation was under way and that the bank was engaging with police and other banks to identify the perpetrators and to protect its clients’ interests.
While it would seem that this is some sort of inside job and it is only a matter of time before those involved are bought to book, it also stands to reason that, given that white collar crime is on the increase, this could well spread and involve other banks sooner rather than later.
The scam involves conveyancing attorneys all around the country and parties in Pretoria, Cape Town, Johannesburg, Bloemfontein, Pietermaritzburg, Nelspruit, Polokwane and King Williams Town have been affected. All 32 cases, involving the same modus operandi, have been reported to the Attorney's Insurance Indemnity Fund (AIIF).
The AIIF, while unwilling to comment, has sent a special alert to the legal fraternity. Essentially, what appears to be happening is that a form of identity theft is being perpetrated against the seller, causing the conveyancing attorney to pay the proceeds of the sale into the wrong bank account. While it is not clear how the fraudsters are inducing the attorney to pay the funds into the wrong account, the fact that so many illegal transactions have already occurred is obviously cause for concern.
Unless the exact mechanism of how the fraud is perpetrated is uncovered, ordinary people will be at risk. Although monies deposited into an attorney’s trust account are ordinarily protected by the Attorney’ Insurance Indemnity Fund, this may not necessarily be the case under these circumstances. If the attorney has not done anything wrong, the fidelity fund can hardly be held liable.
The Attorney’s Fidelity Fund Act states that:
“The Attorneys Fidelity Fund is a statutory body established and regulated by the provisions of the Attorneys Act of 1979 (“the Act”). Its objective is to protect the public against loss as a result of the theft of trust funds by practitioners. The protection provided by the Fund encourages the public to use services provided by legal practitioners with confidence.”
The apparent problem is that the Act specifically stipulates “theft of trust funds by practitioners”. While the modus operandi of the fraudsters is not yet clear, it is highly unlikely that the perpetrator(s) is/are the conveyancing attorney concerned. This raises the moot question of whether the AIIF will cover out-of-pocket sellers in these circumstances.
It stands to reason that if a bank employee is involved, the bank will make good the loss. However, this is not written in stone.
Perhaps the safest thing to do until the investigation has been completed is to remain in contact with the conveyancing attorney and confirm that any proceeds of the sale are going to be paid into the correct account. Forewarned is forearmed.