Technology and fraud in real estate: part of the problem and the solution

Fraud in the real estate industry is on the rise in Canada at an alarming rate. This can be attributed to a variety of factors, but one of the most prominent is how quickly the world has evolved to be increasingly digital – which has enabled fraud to evolve just as quickly.  

While we have largely benefited from this accelerated digital adoption, it also brought risks as fraudsters and cybercriminals have become, and continue to become, more and more sophisticated. As such, it has become essential for all real estate professionals, home buyers and homeowners to understand the threat of fraud, how it has evolved due to advances in technology, and how they can best protect themselves or their customers.   

This is something the industry is working together to accomplish, from adapting processes and establishing best practices to exploring new technologies as part of the solution. However, further collaboration will be needed to continue to detect and prevent fraud as industry technology continues to evolve.  

The increasing threat of fraud  

Technology has completely transformed the fraud landscape, making title fraud and other types of fraud easier to commit, more widespread and more sophisticated than ever before.  

The pandemic further fueled this fire, with the need to swiftly shift from in-person to digital processes ushering in a deeper dependency on technology. This also led to the development of new ways of doing business, spanning from virtual signings to the streamlining several steps of the real estate process. While these speedy changes solved pandemic-related challenges, they also resulted in an increase in fraud instances, meaning the industry had to quickly respond to new threats.    

This is nothing new, as fraud is ever evolving based on the environment fraudsters are operating in. For example, the falsified documents used in recent title fraud cases have reached a level of sophistication previously unseen in the Canadian real estate industry. But it does require industry participants and homeowners and buyers to be more vigilant than ever.   

Is technology part of the solution, too? 

While technology has contributed to the increased frequency and scope of fraud in Canada, it has also played a central role in detecting fraud, from monitoring spending patterns to ensuring payments are protected. As technology continues to advance, we have an opportunity to build on existing secure solutions by adding innovative layers of fraud detection intelligence to increase protection measures and reduce risks. For example, criminals are using advanced technologies to create fake IDs, but identity verification software has also advanced to help spot these very sophisticated fakes and can even reveal whether a picture was photoshopped onto a document or whether the watermarks aren’t properly positioned.  

That being said, it’s important to note the technology is only part of the solution, not a fulsome one. No matter how advanced technology becomes, it should always be paired with expertise in detection and prevention of fraud. This combination is what will allow us to constantly adapt to detect and prevent evolving fraud threats.    

Prioritizing protection 

While technology, expertise and collaboration are what will drive industry solutions, it’s also important for homeowners to proactively protect themselves and for industry professionals to encourage them to do so. The best way for homeowners to protect themselves from title or transfer fraud is a title insurance policy, which will help with compensation for losses incurred.  

Additionally, all policies include a “duty to defend.” This means that when title fraud is reported to the company the homeowner holds a title insurance policy with, they will walk them through the process of restoring the property title. This also includes navigating the legal process and accompanying expenses, within the limits of their policy. 

As the real estate industry continues to transform in response to new technologies and continuous innovation, participants will need to work together to detect the ever-evolving threats that come with this, including more sophisticated forms of fraud.  

 With this in mind, it’s important that we continue to encourage industrywide discussions about the need for greater collaboration on fraud detection, the benefits of information sharing, and the importance of making technology more widely available to professionals interacting with real estate clients. This is what will allow our industry to continue to evolve while simultaneously detecting and preventing the threats that come with this ongoing progression.

Daniela DeTommaso is president of FCT (First Canadian Title). She is responsible for overseeing all the lines of business across Canada, with a network of over 900 employees. She has been with FCT for over 25 years and, most recently, led the Residential Lending Solutions (RLS) group and FCT’s product transformation and data strategy. 

FCT recently held a panel discussion featuring Daniela DeTommaso and Adkin Holder, detective with the Financial Crimes division of the Toronto Police Service (TPS), with John Tracy, senior legal counsel at FCT, moderating the discussion. The panel examined the issue of title fraud, the different types of fraud affecting homebuyers and homeowners, the role identity theft plays in title fraud, and what consumers can do to protect themselves.  

The full panel discussion is available here. 

There’s been at least one attempt at title fraud every four business days in Canada in 2023.