The global pandemic has changed many industries, processes and ways of doing business. However, if there is one shift that was well underway prior to the pandemic, it’s the transition to an online world.
The ongoing digital revolution has drastically altered the way we live and changed consumer expectations across all industries, and real estate is no exception.
As digital transformation continues, however, so too does the amount of information available in the cloud, providing more opportunities for fraudsters looking to access vulnerable data.
With this in mind, digital transformation can be a contributing factor to the problem of digital fraud, but also a critical resource for solving it.
Moving away from traditional processes
The global pandemic has expedited the adoption and integration of various technologies, replacing previously offline or in-person activities with digital options.
Today, digital experiences like virtual appraisals, remote closings, e-signatures and cloud-based document sharing have become must-haves for consumers, not just nice-to-haves.
Across all steps of the real estate transaction, a critical example of this transformation is identity verification. Previously, the traditional, in-person model for validating identity relied on one person reviewing a driver’s license to ensure it matched the person in front of them.
This is a process that has been used for decades, but it is one with potential to leave room for human error if fraudulent information is being provided.
There is no doubt that fraudsters are becoming more sophisticated and, as careful as an individual may be when checking the identification, it can be difficult to flag fraud based on simply an in-person manual review.
Fast-forward to today.
Given the ongoing importance of identity verification in a real estate transaction, the model had to be adapted to ensure identification could still be verified, while taking into account social distancing measures and limited in-person meetings.
With new digital ID verification solutions in place, lawyers were presented with an opportunity to decrease the risk of incorrect identification and verification.
Identifying new types of online fraud
Despite the reduction in potential human error, the shift to digital does not negate all risks.
Fewer in-person meetings are resulting in clients becoming more reliant on email communication and more sensitive information being stored in cloud-based databases, ultimately leaving them vulnerable to email or money transfer scams.
Wire fraud in the funding process, for example, has become more prevalent. It can occur when fraudsters intercept an email chain and instruct a law firm to send funds to a different, fraudulent account.
Prioritizing communication to eliminate risks
During National Cybersecurity Awareness Month, customers and businesses are encouraged to ask questions to ensure they understand all of the new online processes they’re exposed to.
Lending and real estate professionals should schedule regular phone or video calls to walk through each step of the process and should encourage clients to call if they are unsure of anything along the way.
This will prevent important personal information being sent over email, which could make clients more vulnerable to fraud attempts.
Navigating the new digitized world
At FCT, we are dedicated to improving digital processes for real estate professionals, delivering a more intelligent and connected journey. However, we recognize we must be cautious in our approach.
COVID-19 has created new opportunities for how identities may be verified, but with that comes additional avenues for fraud – and fraudsters are only getting more sophisticated as they adapt to the COVID-19 environment.
Luckily, this isn’t a new trend; technology will continue to evolve to be able to better detect, deter and prevent fraudulent real estate transactions.
In such a highly regulated industry, we believe a mature and informed approach to technology is always best.
Organizations across all sectors need to remain proactive and open to new technologies, ideas and partnerships that can help Canadians continue to navigate the new normal and protect themselves and each other from potential cyber threats.