October 2007

Vol 7 - No. 4
 

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Legal | October 2007

 


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Preventing Identity Theft and Title Fraud

BY JAY CHAUHAN *

Theft of Identity and Title have become big business in United States of America and Canada costing millions to the Title Insurance Companies and the private property owners. Property and identity theft have proliferated on a large scale in the recent years not only in Ontario but the rest of Canada and the United States of America.

This type of a White Collar crime is carried out without using a gun or assault and without entering a bank or a house. It requires a fair degree of sophistication in replicating the identity documents and signatures and understanding of the real estate conveyancing procedures. The level of sophistication of the criminals in this area is growing. The amounts that skilled fraudster can steal is typically in the hundreds of thousands of dollars.

 

This type of a crime is relatively a new phenomenon which has grown big in the last about five years and the volumes of money lost is growing rapidly each year. The arrival of Title Insurance has softened the blow to the average citizen who owns a house and has taken Title Insurance. Arrival of Title Insurance in Canada and its wide spread use goes back only about ten years. It is not yet common for the older home owners yet to have Title Insurance although such Title Insurance is now available. Currently most lenders will expect Title Insurance when they lend on the security of the property.

 

A typical title theft is planned by the con artists with considerable skill and knowledge of the real estate procedure in buying and selling a property. It also requires the ability to obtain and copy the identity documents of the victim. Fraudsters use many variations for title and identity theft. In a typical scenario they create a fictitious offer to buy property using false signatures and without the knowledge of the real owner. With forged identity and employment letters mortgage funds are obtained. The offer is taken to a lawyer to carry out the transaction who unsuspectingly carries out an entire transaction in the normal way. The proceeds of sale are then transferred by the fraudster to his account and he disappears. Usually the mortgage payments are made for a few months. The real owner comes to know that his property has been sold out when the mortgage company sends a notice of collection.

 

The Lawyers, Police and the Government are just beginning to understand the nature and extent of this problem which causes enormous losses to those who are affected by this fraud. The lawyers are now being taught how to identify such theft. In the past it was not the practice of the lawyers to check out their own clients and their own identities through citizenship card, health card or a photo identity like a driverís licence, but now it has become the norm. Checking the clients own identity through the lawyers is now mandatory for most lending institutions. Unfortunately, a few lawyers have also been tempted by the potentially large sums that they can obtain from such theft. 

Title Insurance is offered by several title Insurance Companies in Canada, including First Canadian, Title Plus, and Stuart Title. Most of them cover fraud. Title Insurance Companies now have more detailed checklists they use and expect the lawyers to use to detect potential theft. The losses to the Insurance Companies run into millions of dollars and there is a need to create systems which can prevent theft rather than compensate the victim and REOSS Corporation of Ontario has designed such a system.

 

Insurance Companies do not just dish out the payment for the loss until a lot of procedures are followed which can be time consuming and expensive. If you do not have Title Insurance the cost of restoring title back to rightful owner can cost between CAD$15,000.00 to CAD$25,000.00. Therefore the prevention of theft with modest cost makes sense.

 

The Provincial Government recently changed the legislation to alleviate the problem. Fines and sentences have been increased for such crimes and restoration of the title is made somewhat easier. Ontario does carry a Land Titles System and the compensation fund to compensate where the title is incorrectly shown on the register. However, this fund does not automatically pay to compensate the victim of such crime.

 

REOSS Corporation, a company based in Richmond Hill, Ontario, uses the state of the art Theft Prevention Systems to prevent such crimes. REOSS prevents identity theft with checking of the proper identification of the person in the lawyerís or lenderís office. The electronic device uses a swipe card system to check the driverís license which is shown on the screen and matched with the information on the government records. Where there is a discrepancy between the two red marks light up to show changes made.

 

Where the person is proposing to change title through a lawyer the scanned and stored information can be checked by the lender and the Title Insurance Company with an access given to them on the website. In addition to the identity checking REOSS can also register a caution on title at the request of the property owner who wishes to be protected for a fee. The caution requires the party dealing with the property to go through the checking procedures of REOSS Corporation to ensure that the proposed transfer or mortgage is genuine.

 

It is helpful for the public, lending institutions and Title Insurance Companies to learn more about how these crimes can be prevented. It is similar to the alarm system you install to stop the burglar. In title theft and ID theft there is a need for more proactive measures to prevent large losses currently taking place.

 

The details of the REOSS Corporation can be found at www.reosscorp.com 

Previous Columns

Jay Chauhan is a mediator, senior lawyer based in Richmond Hill, Ontario, near Toronto, and an Economist from The London School of Economics. He is a  graduate of  the Berlin University in Agricultural Economics. He has 34 years experience and writes on legal matters. He received Canadian Journalists' and Writers' Club (CEJWC) award  for 2004 in the Internet category - Opinion - for his legal columns in South Asian Outlook e-Monthly. His email address is:  jaychauhan53@hotmail.com . His website is:  www.jaychauhan.com]. 

 

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