Advances in artificial intelligence (AI) technology are increasing the threat to solicitors of deepfake-enabled vendor fraud, with conveyancing and property transactions a particular target. Where successful, these frauds can inflict significant financial and reputational harm, both on a firm and its clients.
To protect themselves, solicitors must adopt proactive measures to bolster their verification procedures and minimise their exposure.
The deepfake revolution
In an age in which the technology landscape is changing rapidly, the rise of deepfakes stands as a testament to the capabilities of AI.
In simple terms, a deepfake is an artificial video created through a machine learning technique called ‘deep learning’. Deepfakes can transform existing source content, for example, by swapping one person for another. They can also create entirely original content, where a person appears to say or do something they did not. Deepfake videos can be indistinguishable from real videos.
Driven by advanced algorithms, deepfakes blur the boundaries between reality and fabrication. As these manipulations become ever more sophisticated, they present potential pitfalls across various sectors, from the legal sector to national security.
Vendor fraud and deepfakes – a looming threat
In the UK, recent warnings from the SRA have highlighted the risks of AI within the legal sector (opens a new window). However, conveyancing and property transactions, where the verification of identities and documents is paramount, are particularly exposed to potential fraudulent activity. Deepfake technology has capabilities of convincingly impersonating sellers or agents, and can deceive solicitors into unwittingly facilitating fraudulent transactions, known as ‘vendor fraud’. This can expose both clients and practitioners to financial and reputational harm.
Vendor fraud is an emerging risk for the legal profession. On 5 March 2024, the SRA updated its anti-money laundering and terrorist financing sectorial risk assessment (opens a new window), detailing an increase in the number of law firms facilitating vendor fraud, and highlighting the risks associated with relying on video calls to identify and verify clients. As the assessment outlines, the conveyancing process provides both the method of committing the fraud and the means of laundering, making it an attractive target for fraudsters.
This rising incidence of such fraud is a cause for concern for law firms, particularly those who use FaceTime or other technology systems to verify potential clients as an alternative to meeting their clients face to face. At this time, we are not aware of any insurer who has experienced a claim in respect of deepfake. Nevertheless, firms may need to reassess the robustness of their electronic due diligence processes given the emerging risk of deepfake technology, and AI advances generally.
Mitigating deepfake fraud risks
As the SRA risk assessment explains, failures in identification and verification make it easier for vendor frauds to take place. Therefore, to minimise their exposure to vendor fraud, firms should:
Exercise caution when clients are not met face to face
Ensure that the vendor’s title is properly established
Properly scrutinise any identity documents to ensure they appear authentic and show no apparent signs of being forged or altered
The SRA also provides warning signs for firms, including:
Properties being offered for sale over or under the market value
Reluctance on the client’s part to provide documentation
Altered, forged, or stolen identity documents such as passports
Pressure to complete the transaction very quickly – for example within a few days
Instructions for minimal work be done – for example no searches requested
Complex or unusual circumstances around the transaction
Cash property purchases
Funds coming from or going to unconnected third parties
Being instructed to act for both the seller and the purchaser in the transaction
Property being bought/sold in back-to-back sales
Conclusion: navigating the deepfake terrain
In light of these challenges, solicitors must adopt proactive measures to mitigate the risks associated with deepfakes. Rigorous identity verification protocols, bolstered by robust technological solutions, can help authenticate clients and counterparties, minimising the likelihood of falling victim to fraud. Additionally, ongoing education and training initiatives, endorsed by the SRA, can empower solicitors to identify and combat deepfake-related threats.
Firms may also consult specialist third parties for further advice. At Lockton, we’ve partnered with Teal Compliance (opens a new window), and can assist firms in keeping policies, procedures, and risk assessments robust and up to date.
For more information, please visit our Solicitors (opens a new window) page, or contact:
Nicola Anthony, Risk Manager
