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Fraud Prevention in Real Estate Industry

  • Richard Marley
  • December 12, 2017
  • 6 minutes read
  • 4266
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Fraud prevention tools that include3rd-party KYC service providers are essential in the real estate industry to elaborate what we mean. Please imagine this: you’re living cosily in your house. You’ve had it for quite some time. You bought it using the money that you received in your inheritance. It has a decent market value and you’re fortunate to not have any mortgages or loans to pay. One day you get up and you go out to check your mail. There is a mail for you from a real estate company that you have never heard of. You open it up thinking it must be an ad or something, but it’s actually a letter addressed to you. As you read through it you get a serious expression on your face and your heart starts to race. You think this has to be some mistake or a misunderstanding. You call the real estate company and ask to speak to the person mentioned in the letter. You tell him your name and he tells you that you have missed out on your mortgage payment for the first month. You tell him that you never applied for any such mortgage on your property. He says you signed the agreements and everything. You tell him that you would like to meet up and he agrees and you go to the address mentioned on the letter. When you reach the place you ask the secretary to direct you to the person whom you spoke with. You enter in his office and the person sitting behind the desk inquires as to how he can help you? You tell him your name,  and tell him you spoke on the phone with him. He suddenly loses the smile on his face and with a serious look inquires if this is a joke. You tell him that you almost fainted when you saw the letter. He says the man he processed the mortgage for was younger and a totally different person. You show him your ID and then he is the one who looks like he is going to faint. You have just become a victim of title fraud, you wonder why didn’t the real estate company do any background checks.

Luckily you have title insurance, although you never thought it would be required…

Another reason for the checks is that the real estate industry is a very lucrative and high equity business. This fact is something that in itself attracts a lot of people to invest in it. Sometimes not all the investor are good. Some plan to launder their money for use in criminal activities or even terrorism. Hence, AML/CFT (Anti-money Laundering/Combating Finance of Terrorism) compliance is imperative.

Are KYC Service Providers the Ideal Fraud Prevention Tool?

The incident above is a plausible scenario and a KYC process including a thorough background check would’ve actually stopped this from happening in the first place. These days real estate agents and companies can hire third party KYC service providers to help with their verification needs. These 3rd-party services providers use advanced AI that not only simplifies the entire process but also makes it extremely fast. The SaaS software integrates with almost all systems. The AI uses the power of the Internet, a webcam or a smartphone camera to carry out its KYC procedure. Let us explain using the fraud scenario mentioned above. When a client comes in for a mortgage they are asked to fill in an online form. Once the form is filled the KYC provider SaaS software kicks in and informs the customer of the process and also that the session will be recorded. Then it asks the individual to face the camera or, if one is not available, sends a link on their smartphone so that they can use their selfie cam. The AI checks for anything that would alter their face or hide it, such as excessive makeup, a mask, or using of a picture instead of showing their live face. The system is advanced enough to account for facial hair, glasses, jewellery and hair cuts. After that the system asks the person to show their ID on the camera and asks them to focus on their picture, name, DOB, and number (if applicable). The AI then matches the picture with the face and checks for signs of tampering or forgery on the ID. During this time the AI also carries out a background check. It searches global watchlists for finding any mention of fraud, money laundering or any links with terrorist organisations; thus ensuring compliance with AML/CFT rules and regulations. If everything checks out  then the system gives the go-ahead for the processing of the mortgage request. All these properties make KYC service providers an effective and efficient fraud prevention tool.

What to Look for in a Good Fraud Protection Tool?

Not all KYC service providers are the same, so we’re mentioning somethings that will make it easy for you to search out a good fraud prevention tool.

The most important  point is to make sure that the company you are selecting is compliant with all rules and regulations in the industry as lack of compliance can result in heavy fines for the company as well as the real estate business. The other important factors is speed. As people get tend to pass on long and time consuming processes that are complicated. Keeping this issue in mind, most good companies do verifications in seconds and provide easy-to-follow instructions. The background checks the system carries out is done simultaneously so it is also processed within the same time frame.

Almost all KYC service providers offer advanced AI solutions, but the good ones offer an adder layer of verification which is done by HI (people). Once the AI gives a verdict it is verified by live people to ensure there are no false positives. The entire process is completed in less than a minute.

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