Circular No 103/2016
Dated 28 Apr 2016

To Members of the Malaysian Bar

Alert: Possible Scam Against Lawyers Involved in Conveyancing Practice

It has come to the Bar Council’s attention that there may be a scam being perpetrated against lawyers who are involved in conveyancing practice.  This information was conveyed to us by the Insurer for the Malaysian Bar Professional Indemnity Insurance (“PII”) Scheme through the Claims Administrator, Echelon Claims Consultant Sdn Bhd (“Echelon”).

Currently, five firms have been identified as victims of a possible scam relating to preparation of loan documentation in respect of properties.  Based on the information available, the potential scam is most likely carried out by a syndicate, and involves sub-sales of residential properties.

The similarities found between the five affected firms include:

(1) Similar modus operandi;

(2) Same names are repeated either as Purchaser/Borrower or Vendor ; and

(3) Possibility of the same Agent (freelance real estate negotiator by the name of “Kumar” or “John”, and/or same despatch). 

As at 3 Feb 2016, the five affected firms have, collectively, 27 notifications amounting to approximately RM14 million or more.  Each firm has its own mandatory limit, and may not have top-up insurance to cover the excess amount of the claims against them. 

Modus Operandi

The general characteristics of the syndicate’s modus operandi are as follows:

(1) The insured practice is approached by a freelance real estate negotiator, with documents indicating that one or more banks has/have approved loans to the Purchaser/Borrower;                                                                                            

(2) The bank then appoints the insured practice to prepare the loan documentation;

(3) The insured practice relies solely on the freelance real estate negotiator and/or freelance despatch to collect documents from, or submit documents to, the relevant party;

(4) The insured practice advises the bank to release the loan sum;

(5) Subsequently, the Borrower default in their loan repayments; and

(6) The bank then discovers that:

(a) the sale and purchase transaction between the Purchaser/Borrower and the Vendor is fraudulent; and 
(b) the letter of undertaking and confirmation from the Developer was forged.

What Can You Do?

We urge Members to adopt good risk management and due diligence practices when handling conveyancing matters.  The following is a list of recommended best practices to minimise the risk of falling prey to such potential scams:

(1) Exercise extreme caution when dealing with so-called Agents or third parties;

(2) Be wary if you are approached by an Agent or a third party to complete a transaction or prepare documents for a transaction;

(3) If a potential transaction is brought or introduced by an Agent or a third party, deal directly with the Developer/Vendor and bank.  Do not allow the Agent or third party to collect and deliver correspondence;

(4) Obtain a copy of the Agent or third party’s credentials (eg MyKad or real estate agent licence);

(5) Identify and verify the identity of the client, Agent or third party, and Developer/Vendor.  Conduct additional independent checks on the Developer/Vendor and Purchaser/Borrower (eg MyKad, or utility bills to prove that the Vendor is residing there);  

(6) If in doubt, and where practical, conduct a site visit;

(7) Only carry out instructions that are given by the client, which should be in writing;

(8) Practise due diligence at all times;

(9) Alert the authorities and the Insurer of the PII Scheme, if you suspect a possible scam; and

(10) Use the conveyancing checklist, available here on the Praktis website) as a tool to minimise risk. 

Generally, the use of a checklist for each file will help minimise the likelihood of a claim being made against a firm.  Please refer to the checklists available here on the Praktis website.  If you are already using a checklist, we urge you to find time to update and improve the checklist. 

Members are reminded to be constantly vigilant, and to report suspected or confirmed scams to the Bar Council by email to the undersigned at secretary@malaysianbar.org.my, with a copy to the PII and Risk Management Department at pirm@malaysianbar.org.my. 

Should you have any enquiries, please contact the officers of the PII and Risk Management Department by telephone at 03-2032 4511, or by email at pirm@malaysianbar.org.my.

Thank you.

Karen Cheah Yee Lynn
Secretary
Malaysian Bar