BLOG: Agents can reduce the risk of tenancy fraud using modern ID checks

The cost-of-living crisis combined with rising interest rates and a more precarious financial situation for many means that household budgets are under increasing pressure.

As a result, some tenants present a risk of fraud and money laundering, which can lead to an increased risk of tenancy fraud such as sub-letting, telling lies around identity or circumstances, or key selling.

Tenancy fraud can take many forms.

It may be that tenants use a fake identity or they may use fake email addresses or provide fake previous addresses.

They may attempt to cover up issues such as County Court Judgements or adverse credit history.

They may try to over-inflate their income or intend to sub-let to make extra money.

Potentially, these individuals wouldn’t have met the affordability requirements to let the property. This increases the risk of rent arrears in the future.

It could also mean the individual is vulnerable to other situations, which could put the property at further risk.

FRAUDSTERS

For instance, in November a fraudster tenant was jailed for trying to sell a Cambridge house. Just two weeks after moving in, Andrew Smith put the house up for sale on a fake estate agency website.

The prospective buyer only discovered the fraud when visiting the house and neighbours said they believed the house was tenanted and not for sale. When investigating, police officers discovered the documents Smith had provided the letting agent were fraudulent.

So what can agents do?

Fraud is becoming harder to detect manually but there are several steps agents should focus on, such as identification checks, tenancy references, affordability and source of funds checks.

Agents should aim to meet the tenants in person, make regular inspections, and build relationships.”

To minimise the risk of fraudulent documents, modern ID verification, AML and open banking technology can help identify potentially problematic tenants.

More broadly, agents should aim to meet the tenants in person, make regular inspections, and build relationships.

WARNING SIGNS

There are also some red flags letting agents should watch out for in potential tenants when approached about a property.

Are they looking to move quickly?

Are they offering a significant amount of rent payments upfront?

Are they trying to avoid going through the referencing and identity verification processes?

Are they refusing to use a digital identity verification platform?

Does their story make sense?

Tenancy fraud is increasing and will likely continue this year and next. Letting agents need to be vigilant, do extra and regular verification and use technology to support and provide confidence and comfort.

Harriet Holmes is AML services manager at risk management platform Thirdfort.