The Scrivener - Winter 2023 - Volume 32 Number 3

Publications Mail Agreement: 40010827

WINTER 2023 | VOLUME 32 | NUMBER 03

Published 3 Times a Year by the BC Notaries Association

WE VALUE BC If you’re among BC’s approximately 2 million property owners, you should receive your 2024 property assessment in the mail early in January. If you haven’t, call us toll-free at 1-866-valueBC. Access and compare property assessment information using our free assessment search service at bcassessment.ca.

The 2024 assessments are based on market value as of July 1, 2023.

If you have questions or want more information, contact us at 1-866-valueBC or online at bcassessment.ca.

For more property information and assessment highlights, visit bcassessment.ca

The deadline to file an appeal for your assessment is January 31, 2024.

Contents Winter 2023 F R AU D

photo: istock/Tashatuvango

6 BC Notaries Protect the Interests of Their Clients.

THE SCRIVENER:

WHAT’ S IN A NAME? “A professional penman, a copyist, a scribe... a Notary.” Thus the Oxford English Dictionary describes a scrivener, the craftsman charged with ensuring that the written affairs of others flow smoothly, seamlessly, and accurately. Where a scrivener must record the files accurately, it’s the Notary whose Seal is bond.

We chose The Scrivener as the name of our magazine to celebrate the Notary’s role in drafting, communicating, authenticating, and getting the facts straight. We strive to publish articles about points of law and the Notary profession for the education and enjoyment of our members, our allied professionals in business, and the public in British Columbia.

Chad Rintoul, CEO, BCNA

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The Power of Instinct Rimpy Sadhra

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Happy New Year!

Val Wilson, Editor-in-Chief

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Fraud Within Us Nigel Atkin

12 Like Lipstick on a Pig . . .

Filip de Sagher

14 Identity Theft Kim Krushell

17 Fraud, Notaries, and FINTRAC Chris Walker

20 Fraud Hurts Everyone.

Amanda Magee

24 Preventing Fraud in the Digital Age John Tracy

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28 Safeguarding Homeowners’ Titles John Rider

33 Good People Can Do Bad Things Christopher Arehart

35 Dealing with Common Near-Fraud

Situations Practitioners May Encounter Kelly Melnyk and Gregory Blue

38 Are Stratas Immune to Fraudulent Predators?

Ian Callaway

42 Why Ugly Passwords are Better Aaron Guillen

45 The Growing Scam Targeting Canadian Seniors Tom Arnold

47 Anatomy of the Grandparent Scam Rhonda Latreille

Î R E A D T H E S C R I V E N E R O N LI N E

https://www.bcnotaryassociation.ca/resources/scrivener Download the magazine to your device for offline reading.

Published by the BC Notaries Association Editor-in-Chief Val Wilson BCNA CEO Chad Rintoul

It’s a W.R.A.P. FOUR IMPORTANT PERSONAL PLANNING DOCUMENTS

W ill R epresentation Agreement A dvance Health Care Directive P ower of Attorney Call your BC Notary today (604) 676-8570 www.bcnotaryassociation.ca

Administrative Coordinator Olivia Kuyvenhoven Courier Lightspeed Courier & Logistics Production fractal design inc. (fractal.ca) email: scrivener@bcnotaryassociation.ca website: www.bcnotaryassociation.ca Send photographs to scrivener@bcnotaryassociation.ca All rights reserved. Contents may not be reprinted or reproduced without written permission from the publisher.

THE MIX 49 BCNA Events

This journal is a forum for discussion, not a medium of official pronouncement. The BC Notaries Association does not, in any sense, endorse or accept responsibility for opinions expressed by contributors.

50 BCNA Events 51 BCNA Events 52 Varying or Terminating a Trust Trevor Todd

55 Building Resilient and CustomerFriendly Land Title Systems Camille Reid

57 Canada Joins the Apostille

CANADA POST: PUBLICATIONS MAIL AGREEMENT No. 40010827

Convention Part 1

Peter Zablud, AM, RFD

POSTAGE PAID AT VANCOUVER, BC RETURN UNDELIVERABLE CANADIAN ADDRESSES TO CIRCULATION DEPT.

59 Should You Incorporate? Part 1 Jeremy Andersen

BC NOTARIES ASSOCIATION SUITE 201, 2453 BEACON AVENUE SIDNEY, BRITISH COLUMBIA V8L 1X7

62 People

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THE SCRIVENER | WINTER 2023

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CEO B C N O TA R I E S A S S O C I AT I O N

CHAD RINTOUL

The BC Notaries Association understands that the Ministry Attorney General intends to move forward with new legislation in the Spring of 2024 to unify lawyers, Notaries, and paralegals under one regulator. The BCNA has long advocated for expanded scope of practice so BC Notaries will have the ability to prepare Testamentary Trusts and Life Estates, file Probate Documents, and incorporate and maintain records of BC Companies.

Photo: iStock/Chad NiseriN

BC Notaries Protect the Interests of Their Clients. Î In Greek mythology, Sisyphus was to spend eternity rolling a boulder uphill, but every time he neared the top of the hill, the boulder would roll back down again. Keeping up with fraudsters is much like the eternal struggle Sisyphus faced.

As criminals use technology to commit crimes against British Columbians, BC Notaries must be ever vigilant and use technological advances to help them in fulfilling their responsibilities. But technology alone is not the answer, as it is often reactive to thwart the evolving schemes used by criminals.

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As legal professionals, generally practising as sole practitioners or in smaller practices, BC Notaries deliver a personal service to their clients.

They “know their clients” personally and adhere to strict KYC (Know Your Client) protocols. While this edition of The Scrivener raises awareness of the reality of fraud today, readers can take comfort knowing BC Notaries are here to protect the interests of their clients.

At the start of this new year, we know that fraud is just one of many challenges facing British Columbians.

BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

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We are confident that expanded scope of practice would stand to further protect the interests of British Columbians in an ever-complicated world, by increasing access to legal services.

Change is also coming to the BCNA office as we say goodbye to Olivia Kuyvenhoven who is leaving the Association to begin articling with a professional accounting firm. I thank Olivia for her dedication and professionalism. We wish her all the best in her career as she pursues her Chartered Professional Accountant designation.

Jenna Gardezy will be joining our office as the new administrator in mid-February, following a period of orientation. Please join me in making Jenna feel welcome to our team!

I wish Scrivener readers a healthy and happy New Year and look forward to greeting members and exhibitors at the BCNA Continuing Education Conference taking place April 5 to 7, 2024, at the Sheraton Wall Centre, Vancouver.

Respectfully, CHAD RINTOUL, Chief Executive Officer

VICE PRESIDENT B C N O TA R I E S A S S O C I AT I O N

The Power of Instinct

R I M PY SA D H R A

Î As BC Notaries Public, we often set our emotions aside and conduct our work based on facts and legalities. There may be a time, however, when we are faced with a situation where something inside says STOP. We sense potential red flags and get an uncomfortable feeling from an individual or a transaction. Our fiduciary obligations are at the forefront of our legal transactions; we trust our gut instinct and help prevent a potential fraud.

I recall a specific scenario few years back where a potential client asked me to register a mortgage on his property in favour of his business partner. The man had dealt with us once previously on a different matter.

He told me his partner had lent him money a few months ago; the mortgage was merely a formality to give his business partner piece of mind. His urgency to get the matter completed as soon as possible alerted my Spidey senses.

I probed further and asked why he had borrowed the money. How much did he borrow? When did he receive the money and on what terms? Did they sign any written agreement?

My client advised that he borrowed $300,000 about 4 months ago for a real estate investment in which he was involved. He hesitated to explain the terms of the loan and stated nothing was in writing.

I asked the term of the loan and how he was planning to repay that debt. He advised he had another property for sale and once that property sold, he would

Photo: iStock/nyaberkut

repay his partner in full. He wanted to secure the loan against the property listed for sale.

I then asked how he had received the money from his partner. At first, he said it was a personal cheque and then he said it was a bank draft.

He commented that I was asking a lot of questions for something so simple.

I explained that this was no simple transaction. We would be willing to assist but first we would need proof of the partner’s cheque or bank draft and also confirmation of that deposit into his bank account.

As I was asking the questions, I could sense he became uneasy. He questioned why I needed proof of the cheque since the money went into his account but was no longer there. I advised that proof of money given was required by my office when doing these types of transactions.

He assured me the mortgage was going to be needed for only a very short

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time since the housing market was doing well and the house would sell quickly.

He handed me his business card and said he wanted to do all his business in one place and would be using us for the home sale, as well. He said he did lots of real estate transactions and would be coming back to use our Notary services many times.

After some further discussion, the client left the office saying he would be sending all the details to my office shortly so we could get the mortgage completed in the next week or so. He never did send us the required documents and I have not heard from him since.

What do you think? Was that a suspicious transaction? Was it a potentially fraudulent transaction? I cannot say for sure but since he did not return to the office, I strongly believe my instincts helped avoid a perilous situation for our Notary business.

R I M PY S A D H RA is a BC Notary with West Coast Notaries.

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KEYNOTE

Happy New Year!

VA L W I L S O N EDITOR-IN-CHIEF

Î The theme of this issue is FRAUD. The information in the articles is leading-edge, well-researched, interesting, and encouraging.

With a direct connection to “the good old days,” our seniors tend to be more trusting when it comes to people looking to take advantage of them through fraud schemes.

Via strong networking and education, however, word quickly gets around about current scams as do ways to avoid them and stay protected.

We have recently entered a leap year . . . a year with an extra day—February 29. It is called a bissextile year and leap day is known as bissextile day.

Last year, I suggested we focus on being kind in 2023.

Here is a positive resolution for 2024 . . . y Practise deepening your patience to help soften your stress. y Choose to Respond rather than React.

The difference is the time you take to understand both the situation and the individuals involved.

Photo: iStock/Ackun

“Because of UGM, I know now that I don’t have to do it alone. I never thought we could live in a place where we're so loved, we're so cared for, and people want to see me and my son do well. I can't think of a better place to grow; I'm forever grateful to be here.”

Help our community overcome poverty, homelessness, and addiction— one life at a time

– Tianna, UGM Women’s Recovery Alumna & Transitional Housing Resident

To learn more about leaving a legacy, contact Francisca Ololo: 604.215.5441 ext. 328 • fololo@ugm.ca • www.ugm.ca uniongospelmission @ugm @ugmvancouver

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BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

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FRAUD

Fraud Within Us N I G E L AT K I N

Banking and Investment Fraud Canada's Globe and Mail (November 2, 2023) reported that “Too many people are getting sucked in by financial fraud.” The article detailed banking complaints nearly quadrupled yearover-year and investment complaints look like they'll be up 70 per cent by the end of 2023.

Illustration: shutterstock/TA design

Î We live in an ocean of information where we need to constantly question the quality of our decision-making in all sectors, in all regards, from financial to personal.

This is even more pressing and vital when that giant pool of information is becoming polluted with misinformation, disinformation, outright lies, and malicious propaganda, not by happenstance or mistake, but deceit by design.

Add to this mix the public’s dilution of critical thought, produced by everpresent screen seduction, the addictive consequences of mass distraction, in some cases the lack of relevant education, even a trusting nurtured naivety in what we used to call citizens, now known as consumers.

Within today’s new environment of omnipresent communication technology—jet planes, computers, and individual screen dominance of virtual, hand-held, voice-activated tools boosted by artificial intelligence there

are more consequences for society to manage—transparency and empowerment among them.

In an interdependent world where everything affects every other thing, it is not a stretch to link economic and political stability, even mental health, with the quality of the environment in which we live. Today more people watch television and computer screens than have ever actually walked on a lawn or forest “bathed” or have ever actually swum in a real lake or in a genuine ocean.

Where there is little or no time left in these distracted times to think things through, to question everything, even this, it is not a stretch to see how many individuals and all systems are affected by intellectual and other fraud.

No sector, profession, or calling is immune to fraud, be they financial, academic, government, medicine, religion, or law. Let’s look at financial fraud and then look at fraud on a larger level.

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In a recent interview, CEO of the Ombudsman for Banking Services and Investments Sarah Bradley said, “Fraud is a scourge that has been our No. 1 banking issue for many quarters and it’s huge right now.”

The article states, “We're at a point where every finance-related email, text, phone call, or door-to-door contact must be challenged. When in doubt, back away, delete, or say no.” Credit card transactions, e-Transfers, and wire transfers were common occurrences but in 2023 there was a spike in investment fraud attributed not only to money involved in crypto-related transactions but also to the “precarious state of the economy and volatile financial markets.”

The recent conviction of FTX founder Sam Bankman-Fried is a current example of the American judiciary taking to task this individual for orchestrating a “multibillion-dollar fraud on the cryptocurrency exchange’s customers.” In other prominent American Court cases, the manipulation of real estate assessment values is being noted as fraud with the former President of the United States deemed fraudulent in his business dealings.

THE SCRIVENER | WINTER 2023

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FRAUD

These high-profile Court judgments and convictions of “intentional fraud” are reassuring to the public, but the many other cases seemingly pass unnoticed by authorities.

Intentional fraud, the “intent” to deceive is apparent and involves premeditated and deliberate action.

Misleading claims, scams, and outright deception are hallmarks of a range of crimes ranging from real estate to identity theft, from tax fraud to money laundering to counterfeiting.

The possibilities of other nonfinancial fraud seem endless—from immigration and citizenship fraud to debit and credit card fraud.

The Fraud Within Us Within the complete kit of being human, most of us come equipped with a touch of larceny and all of us can own up to stunning levels of naivety. Fraud outside the realms of finance runs rife.

It seems fraud in many of its current other manifestations is increasingly prevalent. Artificial intelligence is gaining strength in all areas of society.

Globalization of markets increases the playing fields for fraud to be criminally effective; tribalism often serves to legitimize the practice of not doing unto others, to protect our interests, or to exploit the weaknesses of others.

Unintentional Fraud Unintentional fraud most often occurs due to oversight, negligence, or a lack of understanding of the law, its rules, or regulations.

While the saying “ignorance of the law is no excuse” and regardless of the intent behind the fraudulent act, it is still considered fraudulent mainly because it results in loss or harm to others.

The distinction between intentional and unintentional fraud is often relevant in legal proceedings. A judge will often base the difference to determine appropriate penalties and remedies.

Misleading claims, scams, and outright deception are hallmarks of a range of crimes ranging from real estate to identity theft, from tax fraud to money laundering to counterfeiting.

In terms of moral perspective, both forms of fraud are generally regarded as ethically wrong and u nacceptable. Bot h u nder m i ne t r ust, fairness, and integrity in business relations and legal transactions, financial activities, or other interpersonal relationships.

Fraud including disinformation, propaganda, stealing, or stifling wealth accelerates in times of war as we are witnessing in the Russia/Ukraine and Israel/Gaza conflicts.

While unintentional fraud could be considered less severe compared to intentional fraud, both are fraught with significant consequences. The best practices for individuals and organizations to avoid engaging in fraud involve exercising diligence, adhering to professional standards, and being honest and ethical.

Closer to home we witness ongoing aspects of fraud in our acceptance or rejection of COVID and other vaccinations. Countless individuals are exploiting the monetization of social media to support white supremist views, racism, misogyny, and to reverse legislative advances of numerous rights, those of gender and human rights.

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BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

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In academia and elsewhere, the cultural shift toward embracing machine-written essays and other works is blurring the lines between authentic learning and fakery. Can the question “If plagiarism produces good societal outcomes does it matter?” be ethically answered today, or do we have to wait, possibly before it is too late to legislate and control?

The acceptance of credentials and experiential résumés of business leaders, politicians, and cultural icons is being routinely questioned. In Canada and elsewhere “Pretendians” and the backgrounds of numerous politicians point to the closeness of that subject. Backgrounds of politicians and others have often proven fraudulent according to numerous news stories. The transparency of records of overly self-empowered individuals seems to come to light over time.

Many contend these are times of chaotic transformation, that in chaos, especially war, “truth is the first casualty.” As well in peacetime, a noted Canadian philosopher once said, “truth is routinely murdered every 50 years.” Science in its many forms offers copious insight into the greatest range of discovery.

Moral Landscapes Decision-making in business, politics, and personal lives requires bedrock understanding of ourselves.

Certain beliefs and behaviours might be “traditional” but are they good for the realities of today? As science evolves and we mature with new experiences, some ageing wisely, are we expected to change with what is new and truer?

In an article titled, “Is Anything Still True? On the Internet, No One Knows Anymore” The Wall Street Journal commented, “New tools can create fake videos and clone the voices of those closest to us… This is how authoritarianism arises.” These are well beyond “interesting times” for everyone. We have moved into the transition from owning our ideas on

technology to being owned by what the technology can dictate. Add to that concept the idea that the mass assumptions about the “fluidity of morality” are also modifying our ability to correctly make decisions. The confidence of our thoughts becomes suspect even to ourselves.

Many of us were raised in a culture of Western thought and distinguished between the attitude of everyday life (being opinion, common sense, the unreflected, uncritical, natural standpoints) and the theoretical attitude (being knowledge, science, the reflected, critical, phenomenological standpoints) that have played a central role in the development of thought.

Philosophers have often noted that “truth” requires at least two individuals in agreement. They are not incorrect.

Discourse, the dialogue between individuals, has been a hallmark of getting to the truth. Today, our “conversations” with advanced Internet tools

Discourse, the dialogue between individuals, has been a hallmark of getting to the truth. Today, our “conversations” with advanced Internet tools and with other cultures at home and abroad disrupt our traditional thoughts and normally confident actions.

and with other cultures at home and abroad disrupt our traditional thoughts and normally confident actions.

N I G E L AT K I N teaches the Evolution of Public Relations course online at the University of Victoria.

He offers workshops and counsel to leverage human capital and exploit the multiplier effect of becoming better communicators.

STEWARDS OF WEALTH EVOLUTION Our purpose is straightforward: to protect and grow client wealth as needs, goals, and circumstances evolve. dixonmitchell.com | info@dixonmitchell.com TABLE OF CONTENTS

THE SCRIVENER | WINTER 2023

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FRAUD

Like Lipstick on a Pig . . .

F I L I P D E SAG H E R

Fraudsters exploit our weaknesses “No beast so fierce but knows some touch of pity. But I know none, and therefore am no beast.”

- Richard III, William Shakespeare

Illustration: shutterstock/nicoletaionescu

Î Fraudsters are out to deceive and will misrepresent facts for their own personal gain. They do that in person or online and many of their schemes typically start with impersonation or forgery.

They will pretend to be someone else, if necessary producing “convincing” identification documents. Or they will provide you with a statement purporting to be from a trustworthy source while it is, in fact, manufactured by them.

In cyberspace that is called “spoofing.” The scammer disguises their true identity via a faked email or website and so tries to manipulate you into taking a certain action.

The consequences in the online world arguably have more devastating consequences than in the real world . . . compare tricking you out of the $20 bill in your wallet as opposed to gaining entry into your online banking profile.

Additionally, online we are surrounded by a glut of unverified data that is overwhelming. Who sees the forest for the trees anymore? And are those real trees? We have to be unceasingly vigilant and must constantly question the authenticity of each and every person and fact.

That entails more than just assessing the source of a statement or reviewing someone’s identification. We should also train ourselves to review circumstantial evidence, such as observing someone’s body language or assessing the style of email-communication.

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BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

Ask supplementary questions. Take time to consider the email in front of you before you act upon it. Quiz the why behind a request.

Unfortunately, as human beings we are also gullible. It can be painful to realize that basic truth. We often want to believe a person or a story because it sounds good. A proposal appears to fulfill a long-held desire. An offer matches our expectations.

A suggestion accords with our preconceived notions.

The use of flattery in that regard is one of the oldest tricks in the book. Fraudsters play on our emotions and sensitivities. Who does not want to be loved? Who does not want to improve their lifestyle? Money and love . . .

Gordon Gekko, played by Michael Douglas in the 1987 movie Wall Street, brutally made the point in a famous scene: “Greed, for lack of a better word, is good. Greed is right. Greed works.” (Gekko, incidentally, ended up being prosecuted for insider trading.)

But greed puts blinders on our rational thinking and fraudsters skillfully make use of that. We are susceptible to stories that are too good to be true and yes, we sometimes want the lipstick on the pig. Who wants an ordinary pig?

To put lipstick on a pig . . . means vainly trying to cover up a fundamental flaw by a superficial change. Used in the real estate world to define a kind of fraud whereby certain property defects are covered up in an effort to pull the wool over a buyer’s eyes.

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It is immensely important to be aware of our weaknesses.

Armed with that self-knowledge, we are much better positioned to avoid rogues and scoundrels, crooks and charlatans, quacks and swindlers.

And in case you need a mnemonic trick to keep you from falling for a trick, think “Greenland” before you reply to the next email. The Viking Erik the Red discovered that big island above the Arctic Circle and deliberately gave it a more positive sounding name—misbranding, in modern parlance.

BUSINESS TO BUSINESS

It is immensely important to be aware of our weaknesses. Armed with that self-knowledge, we are much better positioned to avoid rogues and scoundrels, crooks and charlatans, quacks and swindlers.

It lured hundreds of settlers to the island where they believed they would find greener pastures, a warmer climate, and more freedom. And all for free. The project floundered, however, and they eventually all starved to death. Greenland is not a green land; it is mainly covered in ice, as Erik well knew.

The grass was not greener on the other side after all but those settlers chose to believe the deceptive name. That was probably the first real estate scam in history. Its valuable lesson? If a deal sounds too good to be true, it probably is.

“Knowledgeable and Capable”

My Muses

604-538-3388 CammackHepner.ca

Reading: Billion Dollar Whale by Bradley Hope and Tom Wright. How US$4.5 billion disappeared thru corruption, bribery, money laundering, abuse of trust, etc.

#106 – 1656 Martin Drive Surrey, BC V4A 6E7

Gordon G. Hepner MA(ALS), Notary Public gordon@CammackHepner.ca

Watching: The 2002 movie, Catch Me if You Can Leonardo DiCaprio as the great impersonator Listening: “Postcards from Paraguay” by Mark Knopfler “I had the power to sign the checks; it wasn’t difficult to do.”

Tasting: I feel bamboozled. Happy Hour, free nibbles, purposefully dimmed lighting, enticing music. I am tricked into another round.

F I L I P D E SAGHER is a Notary Public and the Manager of Complaints at The Society of Notaries Public of British Columbia.

Alexander Ning Notary Corporation Alex Ning Notary Public, Mediator, Immigration & Refugee Counsel

Alex Ning

Notary Public, Mediator, Immigration & Refugee Counsel

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206 - 8120 Granville Alexander NingAvenue, Notary Corporation Richmond, BC, Canada V6Y 1P3

206 - 8120 Granville Avenue,

Email: alex@annc.ca Fax: 604 270-4751 Richmond, BC, Canada V6Y 1P3 Direct: 604 270-8155 Telephone: 604 270-8384

Email: alex@annc.ca Direct: 604 270-8155

Fax: 604 270-4751 Telephone: 604 270-8384

THE SCRIVENER | WINTER 2023

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FRAUD

Identity Theft KIM KRUSHELL

and How it Relates to Mortgage Fraud

Part of the reason for this is because more and more organized criminals, state actors, and lone hackers are getting into cybercrime and particularly identity theft because they can generate so much revenue. According to the Canadian Anti-Fraud Centre (CAFC), identity theft currently ranks second behind phishing attacks.

Photo: shutterstock/Benoit Daoust

Î Mortgage fraud is on the rise in Canada, particularly in British Columbia and Ontario where according to the CBC, at least 32 properties in the two provinces have been involved in fraud this year.

successfully been able to steal homes out from under homeowners. Without more preventative measures being taken, mortgage fraud in Canada is only going to continue to increase and increase exponentially.

Much of the mortgage fraud we are seeing today involves Identity theft, which is the unauthorized use of someone else’s personal information, such as name, date of birth, Social Insurance Number, or bank account details that are used to commit fraud.

Rate of identity fraud in Canada from 2008 to 2021 (per 100,000 residents)

08 009 010 2011 012 013 014 015 016 017 018 019 020 021 2 2 2 2 2 2 2 2 2 2 2 2

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Data breaches, according to a 2022 Javelin Strategy and Research IBM study, have become very costly for business. The average global cost of a single data breach for a business amounts to $4.35 million. The cost is much higher in the US, where it currently stands at $9.44 million.

How it works is that once a hacker successfully carries out a data attack, they will either ransomware the company to pay money to get their data back or release the data on the dark web for other criminals to purchase and use for their criminal purposes.

With easy access to advanced technology, identity thieves can create fake ID using another person’s stolen personal information that is virtually impossible to detect making it easy for them to commit mortgage fraud.

That is why we are seeing stories in the news where fraudsters have

As of October 31, 2023, the CAFC has received reports totaling CAD$448 million in reported fraud losses; that is a low number given it is estimated that less than 5 to 10 per cent of fraud victims report the fraud. Identity theft is a booming business because it is so easy for criminals to purchase identities on the dark web that are generated from the growing number of data breaches that hackers successfully implement against government entities, hospitals, businesses, and organizations.

Source: Statistics Canada (StatsCan) 2022

BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

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It is the combination of data breaches through phishing and ransomware attacks and the technological capabilities to generate exceptional fake IDs that are resulting in a tsunami of cybercrime.

WHICH ONE OF THESE PEOPLE IS A FRAUDSTER?

Global Cybercrime Damage Costs: $6

Trillion USD a Year *

$500

Billion a Month

$115.4 Billion a Week $684.9 Million an Hour $11.4

Million a Minute

$190,000 a Second *Source: Cybersecurity Ventures

For BC Notaries, one of the ways you could be affected is with the ability of criminals to generate fake IDs using stolen personal information that you cannot visually tell is fake.

With the recent frauds that hit the media this year, the Title Insurance companies investigating those frauds noted the fraudsters were confidant meeting in person as well as online with mortgage brokers, Notaries, and lawyers. For regulators, that is a big wakeup call as there is a false sense of security that meeting in person will protect against fraud as opposed to meeting online, when in fact the fraudsters are so confidant in their fake ID, they will meet in person or online.

The fake IDs are so good that even government-issued selfie ID technology—the technology used to identify fake IDs—is not foolproof. What we are learning is that to combat the growing problem of undetectable fake IDs, you need to have multiple ways to verify the identity of an individual, not simply rely on ID. The good news is that multi-factor digital identity verification technologies are emerging onto the scene to help combat those fraudsters.

Answer, It could be Anyone!

Mortgage Fraud is on the rise in Canada!

Meet your FINTRAC KYC requirements and mitigate fraud with Identity Verification by Treefort in partnership with the BC Notaries Association, members can now access Treefort’s KYC On-Demand free for a limited time.

Simply click on the Treefort Link in your member portal and our team will administer the IDV for you.

Loving animals is who you are.

With a gift in your will, it’s forever.

Contact us today to learn more about leaving a compassionate gift that creates a brighter future for vulnerable animals.

Clayton Norbury 1.855.622.7722 foreverguardians@spca.bc.ca

foreverguardian.ca

The technologies, while not 100 per cent guaranteed to stop all fraudsters, are the best tool available to combat most of that type of growing fraud and meet your FINTRAC KYC requirements.

KIM KRUSHELL is Co-Founder of Treefort Technologies.

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Working together with Notaries in and around Vancouver since 2011.

We can help your clients with • Probate Applications • Legal Advice to Executors • Testamentary Trusts

• Living (inter vivos) Trusts • Incorporations

Because we are focused estate-planning and probate lawyers, we refer all real estate transactions to Notaries across BC.

Connect with us to see how we can help.

www.westcoastwills.com | e. info@westcoastwills.com | p. 604 230-1068

Vancouver | North Vancouver | Burnaby | Squamish

FRAUD

Fraud, Notaries, and FINTRAC Î Fraud in its many forms has grown to be one of the largest categories of criminal offences across British Columbia, Canada, and most nations around the globe today.

Frauds can be simple or ultra complex depending on who and what is involved. Similarly, the outcomes can run from a quick financial return to significant dollar amounts earned by the perpetrators of the crime.

When it comes to frauds that impact on BC Notaries, real estate fraud stands out, given that sector involves Notaries in a variety of ways such as real estate conveyancing, funding through private loans, and even estate planning.

Fraud Tied to Private Loans

Keep in mind, fraudsters will frequently take steps to make it appear they are coming from a trusted referral source; they may also be familiar to you as they were a party in another transaction you were involved in.

Let’s take a look at some examples from each.

Fraud Tied to Real Estate Here are some of the more common real estate frauds found in Canada today. y Value fraud typically involves a fraudster who agrees to purchase real property and flips it to a complicit purchaser at an artificially inflated price.That step positions the new purchaser to deceive a mortgage lender as to the true value of the property when obtaining a mortgage loan. y Title fraud is a growing preference with the fraudster using a fake ID to pose as a homeowner. They find the owner's name through land title searches and use that along with a photo of themselves. Then the fraudster hires a legitimate real estate agent to list the property.

C H R I S WA LK E R

y Broker Fraud involves misrepresenting a property through its age, background, dimensions, and defects. The Broker may even use a false licence or provide the buyer or seller with fake credentials to further their scam. y Mortgage Fraud often involves lying on a mortgage application about facts concerning the applicant or their broker—who falsifies information about employment, income, investments, and the like—that increases the chance a mortgage will be approved or enables the applicant to apply for mortgages far above the applicant’s ability to repay. For example, a stated income of $57,000 became $75,000 with the simple rearrangement of two numbers. Or a broker alters details such as a credit score or forges employment letters.

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y Loan fraud occurs when a scammer pretends to extend a gracious loan. In exchange for the loan, the scammer may ask for the title of the home. With the title in hand, the thief may stop sending loan payments to the homeowner and instead resell or remortgage the property. In cases of fake loans, they often advertise an incredibly low interest rate.

On real estate deals involving private lenders, experience has shown that the following circumstances should be considered red flags indicating a possible fraud.

Large numbers of referrals from a new source.

After having someone approach you saying they were referred by a friend, that person then sends you a lot of business right away. Keep in mind, fraudsters will frequently take steps to make it appear they are coming from a trusted referral source; they may also be familiar to you as they were a party in another transaction you were involved in.

Many similar transactions over a short timeframe Within a few weeks you are asked by the new referral source to do the same type of transaction repeatedly, after never having seen those types of transactions before. If anything, the value of the mortgages seems to grow with each transaction you work on.

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“Rush” Transactions

Fraud and FINTRAC

A strong push to close from your client, and in particular the referral source, is a red flag that should not be ignored.

Money laundering is an included offence with any fraud. What does that mean? Simply said, wherever there is fraud, there is money laundering. Fraud-related criminal activity produces money that needs to be washed. The fraud itself is the primary source of the proceeds, which in turn are subsequently laundered by the criminal in an attempt to hide the source.

Fraud Tied to Estate Planning Estate planning is basically the process of planning who will inherit the different elements and assets you own in the event of your death or incapacitation. The aim of the estate-planning process is to ensure an individual’s assets are shared in the way they intend and to provide a clear plan of asset distribution, removing the need for conflict and saving loved ones a lot of money and time, too.

When it comes to frauds associated with estate planning, it can happen from individuals who say they are acting for the client who has approached a Notary to ask for help with their estate-planning requirements. Those individuals, through their relationship with the person, are intent on having input into the planning process . . . generating outcomes that will be in their favour.

One of the best ways to monitor for such fraud is to be aware of various red flags that suggest fraud could be happening.

They include the following. y The client reaches out to the Notary, through a caregiver, where the client wants to make sudden modifications to their Will in anticipation of their pending death. y The provisions requested in a revised Will differ significantly from what the client had promised the heirs in a previous Will. y A caregiver opens a joint bank account with the decedent before death. Upon a review of past bank statements, the Notary notices the caregiver took money from the account for personal gain. y The client made a number of valuable inter vivos gift transfers to their caregiver while under their care. y The client’s personal representative (executor) is taking too long to settle the estate and assets are slowly disappearing.

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Simply said, wherever there is fraud, there is money laundering.

Fraud-related criminal activity produces money that needs to be washed.

BC Notaries and their staff are designated as members of a reporting sector required to address evidence of money laundering according to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), its supporting Regulations, and the Guidance of FINTRAC, Canada’s financial intelligence unit.

That said, for example, if the employee of a Notary practice suspects a conveyance process could be connected to a fraud, the employee should report the reasons for their suspicion to the AML (Anti-Money Laundering) compliance officer at the Notary practice as an unusual transaction. The compliance officer is then required to review the details of the transaction itself and in particular the details that made it unusual in the first place.

During that review, the compliance officer is trying to determine if there are reasonable grounds to suspect (RGS) that the transaction is tied to the commission or attempted commission of a money

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laundering offence—in this situation a fraud. Now RGS proof is not absolute proof that a money laundering offence has occurred. Therefore, the compliance officer does not have to absolutely prove a fraud took place.

According to FINTRAC’s Guidance on Suspicious Transactions.

“Reasonable grounds to suspect (RGS) is a step above simple suspicion, meaning there is a possibility that a money laundering (ML) offence has occurred. You do not have to verify the facts, context, or ML indicators that led to your suspicion, nor do you have to prove that an ML offence has occurred in order to reach RGS. Your suspicion must be reasonable and therefore, not biased or prejudiced.”

Reaching RGS means the practice compliance officer has considered the facts, context, and ML indicators related to the conveyancing transaction and subsequently concluded there are reasonable grounds to suspect that this particular transaction is related to the commission of a money laundering offence.

The compliance officer must be able to demonstrate and articulate their suspicion of money laundering in such a way that another individual reviewing the same material with similar knowledge, experience, or training would likely reach the same conclusion as the compliance officer.

Once the RGS level has been reached, the compliance officer must then submit a Suspicious Transaction Report (STR) to FINTRAC. The STR must be submitted as soon as practicable after the decision to report has been made.

FINTRAC has defined as soon as practicable to mean you have completed the measures that have allowed you to determine that you reached the RGS threshold and as such the development and submission of that STR must now be treated as a priority.

FINTRAC may question a delayed report; the greater the delay, the greater the need for a suitable explanation.

Failing to submit an STR, or not submitting an STR in a timely manner, may directly affect FINTRAC's ability to carry out its mandate. Therefore, FINTRAC expects that when the compliance officer has completed their review and determined that the transaction has reached the reasonable grounds to suspect level, then they will prioritize the submission of the necessary STR. And the Beat Goes On Fraud associated with real estate and real estate associated activities such as private loans does occur more frequently than many of those working in the field suspect. FINTRAC is fully cognizant of that reality and has subsequently started to add more and more real estate associated sectors as reporting entities.

Recently, a trio of real estate service provider groups were officially recognized as reporting entities under the legislation . . . mortgage brokers, private lenders, and mortgage administrators.

Each business providing one or more of those services will be required by the latter part of 2024 to have in place a full, functioning AML/ATF compliance program comparable to the BC Notary requirements. Furthermore, any Notary also involved in brokering mortgages, private lending, or administering mortgages will have to develop a compliance program for those services as well.

It would not surprise me if a further expansion of real estate-related professions, including title insurers, as reporting sectors will come about.

C H R I S WA L K E R is President of About Business Crime Solutions, Inc. info@moneylaundering.ca

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A M A N DA M AG E E

Fraud Hurts Everyone.

Our Experts

Working Together,

Karen Decker, Senior Vice President, Chief Underwriting Counsel – International Operations, Stewart Title

Paul Gill, Manager of Investigations Unit in Claims, Stewart Title

There Is Much We Can Do to Prevent It Title fraud has made headlines this past year and continues to be a concern for those in the real estate industry.

Î With fraudsters and technology becoming more sophisticated, it can be difficult for even the most experienced real estate professionals to detect something amiss on a transaction.

That is why information is key and why, for decades, Stewart Title has been at the forefront of educating on title fraud detection and prevention. I am pleased to be able to address this topic again by sitting down with a few of our in-house experts to relay their tips and best practices.

Jay Krushell, Chief Legal Officer, Treefort Technologies

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Amanda: How is title fraud perpetrated and why is it on the rise?

Karen: Title fraud is when someone impersonates the owner of the property to sell or mortgage it and absconds with the funds. That happens in many ways but, in most instances, impersonation is key, facilitated by the ease with which fraudsters can obtain fake identification in the name of the person they are impersonating. In past Stewart Title claims, we’ve seen title fraud by family members using a forged Power of Attorney to defraud another family member; but now, the most common type of title fraud involves strangers TABLE OF CONTENTS

who use fake identification documents to impersonate the true owner, often on vacant or tenanted properties or targeting the elderly and other vulnerable individuals.

Karen: There are many different indicators of potential title fraud but some of the most common ones can be identified by examination of the facts.

The rise in title fraud can be attributed largely to more sophisticated technology leading to very convincing fake ID. Because almost all fraudulent deals involve impersonation, there is now an emphasis in the real estate industry to be more vigilant when verifying client identity.

y Does the deal make sense? For example, look at the interest rate and term. If you see a private mortgage that has a 1-year term, a relatively high interest rate, is interestonly, and all the interest is prepaid, is that the type of mortgage a borrower who has a mortgage-free property would need to obtain (versus a lower rate institutional mortgage)? Because nobody is looking at the mortgage for a year, the fraudster has a whole year to get away with the crime.

For example, we had a claim where an 85-year-old widow was served with a Notice of Legal Action in which she was named as the defendant. The plaintiff, a lending company insured by Stewart Title, claimed she had obtained a mortgage and defaulted on her payments.

The woman denied having taken out such a mortgage. Upon investigation, we found that all the identification and other documents used to procure the mortgage were fraudulent and that an appraisal supporting the application was also fake, including the photographs of the supposed interior of the condominium. She had no idea how the fraudster obtained her personal information. Stewart made a payout to the lender of approximately $350,000.

Paul: On the investigation side, we’ve seen an increase in title fraud related to private lender deals and tenanted properties, as well as a trend toward more elaborate schemes by criminal organizations.

y Is the property mortgage-free? Mortgage-free properties tend to be targeted. If there's very little money after paying out a prior mortgage, then it’s less likely a fraudster would target the property. But if the fraudster could get a million dollars, because the property is mortgage-free there’s …we found that all the higher reward to the fraudster and therefore higher risk of title fraud. identification and other

documents used to procure the mortgage were fraudulent and that an appraisal supporting the application was also fake, including the photographs of the supposed interior of the condominium. She had no idea how the fraudster obtained her personal information.

In one of our claims, a property was purchased for rental income.

The property was rented through a real estate agent who undertook the due diligence and vetting of the renters. Unfortunately, the renters were part of an organized crime group that used high-quality fraudulent ID, credit reports, and employment records to impersonate the owner and her husband. Within a couple of months, the criminals had sold the property to a real estate wholesaler. Imagine his surprise, when the true owner’s husband went to the house to do routine maintenance and was advised by a neighbour that the house had been sold.

The owner submitted a claim and we successfully had the title reverted to her.

Title frauds like those are becoming more frequent. By tracking them, we can implement new measures and educate our clients on ways to detect and prevent them.

Amanda: What helps you spot a potentially fraudulent transaction?

y Where is the money being paid?

Criminals want to get the money away as easily as possible. Often their lawyer or Notary is told to send the money to a corporation or to someone to whom the client owes debts. Requests to send money to anyone other than the registered owner(s) of the property or to pay for legitimate transactional costs—legal fees, property taxes, etc.—should cause you considerable concern and must be reported to your title insurer before closing.

Looking at the title information for suspicious patterns. Are there lots of flip transactions or regular private mortgages going on and off, or is there other strange activity on the title?

y Is the property vacant or tenanted? y Is a Power of Attorney being used?

When there are “red flags” of title fraud, the legitimacy of the entire transaction should be investigated.

Paul: One thing to look for is whether there is a lack of Canadian or provincial government-issued ID. And if there is ID, is it real?

Stewart’s Underwriting Department has become very good at looking at ID and identifying errors such as a driver’s licence that should have an address in the issuing province but has one for a property in another province. Or, the

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…we ask questions during the order process that are designed to recognize transactions that need scrutiny. signatures are inconsistent, the borrower’s stated age and appearance don’t match the photo, there are misspellings of the borrower’s name, or the font and spacing are not accurate.

When we are uncomfortable with the transaction or the ID, that's when we use an online multi-factor identity authentication and verification tool (often referred to as “MFA”).

We also apply the banking component in the verification tool that checks for an element most fraudsters don't have—a bank account in the name of the client that has been established for a period of time and has regular transactions going through it. We do not receive actual balance or specific financial transaction details. MFA technology has proven very useful in preventing some title frauds this past year.

Amanda: How do we work together to stop title fraud?

Karen: Legal professionals should have a system in place to identify transactions that may require more scrutiny so they can identify title fraud as soon as possible.

Always ask yourself. y y y y

Do you know your clients?

How did they come to you?

Were they referred by a reputable referral source?

Does it make sense that the client has chosen you? For example, does the title show they've been using another lawyer or Notary recently, does the person live anywhere near you or speak the same language as you? Do they actually know anything about the property?

Also, what is the nature of the transaction?

If the deal doesn’t make sense, you may not want to get involved or you may want to request that the client use an MFA technology to verify their identity and investigate fraud indicators. y Is there pressure to close quickly? y Is the client unwilling to connect with you consistently or resisting virtual or face-to-face meetings? y Is the client appearing to be influenced by another party?

In particular, be aware of elder abuse. y Is there a request to send the proceeds to parties other than the registered owner(s)? Any of those things are red flags.

As title insurers, we ask questions during the order process that are designed to recognize transactions that need

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BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

scrutiny. Those and follow-up questions are based on claims we've had and are ever-evolving. The more information you give us, the better we can assess the deal. The need for scrutiny is imperative as fraud schemes continue to evolve.

For example, we saw one case where a woman developed a relationship with a man over a couple of months. Eventually, she convinced him he should purchase a condominium unit she knew of. Unbeknown to him, the woman was working with a co-conspirator impersonating the owner of that particular unit. The man bought the unit and later found out he had purchased it from an imposter.

When we investigated the claim, we asked the man how he knew the woman. He said they were friends. But we can’t assume that because they were friends, they really knew each other. We have to look at the context of their friendship and ask, “How long have you known this friend? Where did you meet this friend?” There's a difference between a longtime friend and a friend you met 2 months ago.

Jay: We’re seeing unprecedented changes targeting title fraud prevention and the use of fake ID. The Cullen Commission investigation has shown that money laundering in BC is a big problem; the governing Board of the Law Society of British Columbia has established a Trust Review Task Force to consider recommendations of the Cullen Commission regarding the handling of trust funds and management of trust accounts by lawyers. As part of its mandate, the Task Force will assess the current trust accounting rules and related requirements, such as client identification and verification.

FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) has revoked a temporary relaxation of their rules that apply to Notaries and proposed amendments to include armored car companies, mortgage administrators, mortgage brokers, and private lenders as reporting entities come into effect on October 11, 2024.

Overall, regulatory bodies are paying a lot of attention to what’s going on and making changes. That’s a good thing but it is challenging when you have all these new rules and the introduction of many new technologies. When combined, all of this can be overwhelming for busy legal and real estate professionals.

In addition, the Law Society’s guidelines say lawyers should be doing robust due diligence on every transaction anytime they move money. Further, as a direct result of the Cullen Commission, FINTRAC has put more resources and funding toward fighting money laundering and enforcing their rules. In both cases, the rules for managing risk are more than just looking at an ID document. It means you have to look for red flags, make reasonable enquiries, and follow up on suspicions and doubts. One easy, cost-effective way to do all the ID and money laundering and title fraud due diligence is to use a tool with multi-factor identity verification.

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Amanda: What is the potential fallout for the legal profession and others in the industry if title fraud is detected?

Karen: Title insurance provides a safety net to recover monies for the insureds, restore title into the rightful owner’s name, and work through the investigative process with different parties including counsel on both sides, real estate agents, mortgage brokers, and law enforcement.

For legal professionals, however, being involved in a fraudulent transaction can be an onerous, time-consuming, and stressful process so preventing it from proceeding is in everyone’s best interest.

Clients expect their legal representative to be the gatekeeper on their transaction. Police, law societies, and regulatory agencies have clear expectations. Therefore, a lot of the fallout from title fraud falls on the legal professional.

Along with the trouble of being involved in an investigation, there’s the possibility of losing clients and rapid reputational harm.

Amanda: Would you like to add final thoughts?

Karen: Title fraud is not a victimless crime. There's a homeowner who’s going through a terrible experience when they find out they don't own their home or somebody else has mortgaged it. Anything we can do to prevent that, including using multi-factor identity verification, is important. It’s a positive service for clients.

Paul: A few additional steps and working with your title insurer can help spot a bad deal and prevent a title fraud from taking place. A title fraud can take a number of painstaking years for a resolution and the toll and possibility of reputational damage are extremely serious.

Jay: Legal professionals have obligations that require having a lot of checks in place. Our platform helps fulfill those duties in a convenient and easy fashion: ID verification that can detect very sophisticated fakes; connection to credit bureaus, telecommunications companies, banks, and other data points that help identify title fraud and money laundering.

We’ve built all those components into Treefort. As a practising lawyer, I saw the need for a tool that could keep on top of all of the evolving steps and regulations required to be both compliant and best protect my clients.

Amanda: I want to thank our experts for their time and for sharing their thoughts. It’s clear we all need be wary and work together to protect clients, preserve the reputation of the professionals involved, and maintain the integrity of the real estate system as a whole so it does not become an easy target for fraudsters and money laundering schemes.

A M A N D A M AG E E is Vice President of Business Development for Stewart Title’s Western Canada Operations.

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Preventing Fraud in the Digital Age

J O H N T R AC Y

Why Is Title Fraud on The Rise?

Photo: iStock

Î Criminals are using new technology to make title fraud even harder to detect.

Can tech also give BC Notaries the edge they need to protect their clients?

Imagine conveyancing a transaction where everything checks out, only to learn later the “seller” isn’t who they—and their ID—said they were. It’s a nightmare scenario, but one that’s become a reality for a growing number of legal professionals because title fraud hasn’t just gotten more common, it’s evolved.

What is Title Fraud?

Title fraud is when someone impersonates the legitimate owner of a property and either borrows against it or sells it out from under the owner. By the time the homeowner realizes that something is wrong, the fraudster is usually long gone with the proceeds. A Real Example: Rick and Diane (names changed for privacy) moved abroad temporarily for work, rented out their Canadian home, and left it in the care of a property management company.

A few years later, they noticed that

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the mortgage on their home had been discharged without their knowledge.

Confused, they asked the property manager to drive by the house. When the manager knocked on the door, a stranger answered, claiming to own the home.

That’s when Rick and Diane learned their own home had been sold to an innocent buyer without their knowledge, and without their seeing any of the proceeds.

Title Fraud Leaves Lasting Damage “Legally, the system believes you actually no longer own your home," Rick told CBC News. The greatest challenge is the target of title fraud carries the burden of proving fraud occurred. Legal costs for restoring a property’s title can easily reach tens of thousands of dollars. Until the title is restored, the owner can’t leverage their home’s equity or sell their property.

The impact of title fraud lasts long after the crime. It leaves innocent people facing the loss of their security as homeowners huge costs and an intimidating process to have title restored. “It feels like it’ll never be done,” said Rick.

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When the COVID-19 pandemic broke out, real estate and legal professionals across Canada had to adapt suddenly to lockdowns and restrictions on in-person meetings. To solve the issue, professionals adopted secure remote signing solutions and regulatory bodies carved out temporary measures to allow them. For example, in BC the LTSA’s “Practice Bulletin 01-20” let Notaries swear land affidavits remotely, before its retirement in September 2023.

That shift helped keep real estate transactions moving, even as a global pandemic shut down other sectors of the economy. It was a huge effort and success on the part of professionals and their governing bodies. Consumers benefitted during lockdowns, as well as after the economy reopened; real estate was faster and more convenient than ever. But fraudsters benefitted, too.

Remote Transactions Title fraud requires the fraudster to successfully impersonate the homeowner. If they’re discovered at any stage of the transaction, it’s over. The closer the interaction a fraudster has with the professionals involved, the greater the chance the fraudster will be exposed. Remote transactions gave fraudsters distance. They no longer had to physically sit in a Notary’s office with their target’s stolen ID, hoping to pass

themselves off as the legitimate owner.

With remote transactions, the fraudster could just hold up the ID to a webcam. Even if they didn’t look exactly like their target’s photo, most inconsistencies could be chalked up to poor camera quality. It was an environment well-suited to fraudsters who could now operate more safely, efficiently, and from farther away. But the threat got even worse when fraudsters started innovating.

and account access to the phisher.

That gives the phisher control over your client’s account; they can scan through it for sensitive information or use it to pose as your client and get even more of the client’s information from someone else.

Title Fraud is Evolving Fraudsters can now digitally create and print forged IDs that have their target’s valid information and the fraudster’s photo. That technique has transformed fraud, since it can even work in an in-person setting. As more and more criminals adopted the new technology, fraud prevention experts raised the alarm.

“One of our key focuses is on prevention of fraud,” said Daniela DeTommaso, president of FCT, at an industry panel on fraud. “It’s all we do, all day long.” But she also took note of how much the threat of fraud has evolved. “We’ve never seen the sophistication in the duplication of these documents that we’re seeing as of late,” she said. “Everybody [handling transactions] is doing their job. Identity has been reviewed multiple times before we see it, but from a mere visual scan, you would often not even know that this documentation wasn’t real.”

Your Clients’ Identities Are More Vulnerable than Ever Fraudsters have more options now than ever before to steal IDs. For example, something as simple as your clients accessing public Wi-Fi networks can leave them vulnerable, since bad actors can intercept their personal data as it moves to and from the cloud.

Phishing is another popular ID theft technique. By posing as an urgent message from a trusted company, government body, or even you, a phishing email or text sends your clients to a fake version of that organization’s website. But when your client tries to log in, they provide their credentials

As the parties conveyancing properties, Notaries can play an important part in preventing fraud and protecting BC’s homebuyers and owners.

Digital ID Verification Because identity has become so easy to steal and fraudsters’ forged IDs are so realistic, safely carrying out transactions without a fast and reliable way to verify identity is often no longer viable.

Enter digital ID verification solutions: Powerful tools that validate a client’s government ID documents faster and more accurately than the human eye. They work by having clients take photos of themselves and their government ID, then send them to the service provider. That provider conducts technology-assisted verification of the identity and sends you a report indicating whether your customer’s identification matches the photos they sent.

Since digital ID verification is usually done through a device your client owns, like a smartphone, it can be performed in-office or remotely. Digital ID verification helps professionals prevent identity theft and fraud, and comply with Know Your Client (KYC) regulations.

How Can Notaries Help Protect Clients from Title Fraud?

As the parties conveyancing properties, Notaries can play an important part in preventing fraud and protecting BC’s homebuyers and owners.

Your client can have their ID stolen without having made a single mistake.

Data breaches at companies holding customers’ personal information and/or IDs can lead to title fraud in the future.

After a breach, your client’s information may end up published on the dark web—the portions of the Internet not indexed by search engines and accessible only with special software.

Ransomware groups often use sites on the dark web to publish stolen personal information to punish organizations for not paying the ransom.

Hackers sometimes use sites there as storefronts, advertising IDs for sale.

Someone looking to commit title fraud can browse the IDs and other personal information on offer until they find an ideal target to impersonate.

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Don’t Discount the Human Factor During the industry fraud panel, Daniela urged legal professionals to trust their instincts when dealing with customers. “It’s really important that you follow your gut. If you don’t know your customer, make sure that [you’re] asking for additional information, asking more questions.” Many fraudsters count on professionals not wanting to seem suspicious of a customer or not feeling comfortable asking personal questions. But asking your clients follow-up questions about themselves and their property is an important best practice for preventing fraud. Even simple, friendly questions can expose inconsistencies in a fraudster’s story if their answers don’t match earlier details they provided or the information you have.

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BC Notaries Speak Your Language

BC Notaries around the province offer many noncontentious legal services in an impressive variety of languages.

English Afrikaans Arabic Bengali Bosnian Cantonese Chinese Croation Danish Dutch Farsi Filipino Fijian Flemish Fookien French Fujian German Gujarati Hindi Hungarian Italian

Japanese Korean Mandarin Persian Polish Portuguese Punjabi Romanian Russian Serbian Spanish Swahili Swatow Swedish Tagalog Taiwanese Taoshan Telegu Turkish Ukrainian Urdu Vietnamese

Search for a BC Notary by languages spoken at www.bcnotaryassociation.ca 26

Title-Insure Every Transaction Even if the threat of title fraud disappeared tomorrow, title insurance would still be a benefit to every transaction, because every property carries the potential for expensive title and off-title risks. Using title insurance on every deal means that if a fraudster does succeed in impersonating one of your clients in the future, you’ve protected that client.

Your client’s title insurance policy can compensate them for their loss but, even more than that, it means they won’t have to navigate the process of proving fraud and restoring their title alone: the policy carries a duty to defend. “I believe that as a title company, we’re there for our insureds,” Daniela said.

“We’re able to deal with the police, we’re able to deal with the detectives on the case. We deal with the mortgage professionals, the lenders, the legal professionals, the Realtors, all parties to the transaction.”

A title insurer’s duty to defend means the insurer steps in between your client and the legal process, helping them through each step, even retaining counsel and going to Court if necessary. By ensuring each client has title insurance in place when they make their home purchase, you can build lifelong protection for them directly into your process.

Use the Right ID Verification Solution If verifying identity digitally becomes an important part of your workflow, that will make it part of your customer experience. Implementing the right solution in the right way can make onboarding much easier, help streamline your processes, and avoid adding customer friction. Friction means anything that slows down transactions or makes it harder to do business with you. Adding security will always add friction, so the key is to keep that increase to a minimum. Look for a digital ID verification solution focused on a fast, simple, and secure end-user experience.

Ideally, you want your clients to interact with the verification service itself as little as possible. Some solutions

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have secure no-password sign-in that can reduce friction significantly. That way, you’re not forcing someone to manage yet another password just to keep the transaction going.

Clients are now more conscious of how their personal information and other data might be used by service providers. Many are also aware of the risk that a data breach at a third-party who is storing their personal information could lead to their ID being stolen.

They can address this latter concern by choosing a safe and secure solution from the right provider.

Rising to Meet the Threat of Fraud, Together “We are committed to protecting consumers, and the [legal professionals] who serve them,” said Daniela. “As fraud in Canada continues to evolve and become more sophisticated, identity verification plays an increasingly important role in prevention.”

Title fraud may be evolving, but Notaries and professionals across the real estate lifecycle are evolving, too. By verifying identity on every transaction, you can take away one of fraudsters’ most important tools.

The technology to accomplish this is already here. Together, we can help protect clients and each other, and work toward a fraud-free future.

Insurance by FCT Insurance Company Ltd. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice. ® Registered Trademark of First American Financial Corporation.

J O H N T RAC Y is a Senior Legal Counsel, Claims, at FCT.

Fraud is evolving, but so are we.

Onboard customers faster and close every deal with confidence: introducing Client ID Verification from FCT.

Learn more at fct.ca ®️Registered Trademark of First American Financial Corporation.

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Safeguarding Homeowners’ Titles

JOHN RIDER

Photo: shutterstock/ tsingha25

Î The absence of multi-factor authentication in real estate transactions has created a multi-billion dollar opportunity for criminals. In 2022, the Canadian Anti-Fraud Centre reported almost 100,000 cases of fraud—representing $530 million in losses, a 40 per cent increase from 2021.1 While that number might seem alarming, it is estimated that only 5 to 10 per cent of people report fraud.2 That means the true number of fraud cases is actually around 1 to 2 million, representing total losses in the neighborhood of $5,300,000,000 to $10,600,000,000. It’s an astonishing amount of money. Of that, only

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$2,883,792 was recovered.3 It’s scary to think you have a 0.0003 per cent chance of ever seeing your money again if you’re a victim of fraud.

It remains easy to surmise that our current fraud issue is partly due to the unprecedented cybersecurity issue we face globally. We are under a constant barrage of attacks, with a cyber-attack occurring every 39 seconds.4 It is easy enough for our confirmation bias to kick in and override our intuition, convincing us that the sophisticated crime rings would target only big enterprises—such as Walmart, Rogers, or Bell. That is how we have landed in our current predicament.

BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

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A simple solution in part to this costly issue exists, at least from a real estate perspective—mandating multifactor authentication (MFA) in all real estate transactions. MFA adds a layer that cybercriminals cannot easily work around by verifying something you have (ID), something you know (address), and something you are (biometric—such as a selfie).

If a password or other authentication method is compromised, it is extremely rare that a fraudster has multiple authentication factors. Introducing MFA into real estate transactions provides a level of safety and security around the transaction. It can help to

ensure your client purchasing their dream home is buying it from the true owner—not a fraudster. Or what about that borrower doing a total equity takeout refinance—is that really their property and equity? In today’s world, it is a guessing game at best. Real estate relies on an antiquated method of verifying ID when more robust options exist; it’s as simple as that.

country. Are they upholding that duty if Canadian citizens are being defrauded to the tune of $10 billion each year?

MFA is not a new concept; its origins are in telecommunications. In 1996, a team that worked for AT&T came up with the idea for Transaction Authorization and Alert System, a system for authorizing exchange codes over two-way pagers.5 The system would eventually morph into what we now know as two-factor authentication.

The late ‘90s also saw the Landmark Senate L0pht Hearings, where a group of seven hackers exposed the risks of the Internet to the United States Senate, famously claiming they could shut down the entire Internet in 30 minutes.6 Those hearings highlighted the need for additional safeguards and helped quantify the need for protocols and governance with respect to how we use the World Wide Web.

While we have an easily accessible, longstanding solution available, we have resistance to implementing MFA from government agencies and governing bodies…

While we have an easily accessible, longstanding solution available, we have resistance to implementing MFA from government agencies and governing bodies; they aren’t interested in inserting themselves where they don’t have to—but shouldn’t they want to do so? Fraud has become a massive issue in this country, which has seen a dramatic rise in the last few years.

You would think government agencies would be jumping at the chance to swoop in and save the day—a problem they could quickly solve with a solution that already exists. According to Microsoft, MFA successfully blocks 99.9 per cent of account-compromise attacks.7 So, not only is there a solution, but a solution proven to virtually eliminate the issue. Isn’t it the government’s duty to protect us when a simple solution exists? When the government takes an oath of office, they are swearing to fulfill a duty to the people of their province or

Tech companies have pioneered the implementation of MFA to protect their customers. They recognize the realities of hacking and have reacted appropriately to safeguard their users and their bottom line. They know it takes an average of 207 days to identify a data breach 8 —a sizeable head start for a cybercriminal to pursue whichever illicit activity they choose.

Those companies have realized, that the minor inconvenience of having their customers use MFA, significantly reduces their financial liability and reputation by gatekeeping even the most basic transactions.

For example, Google’s Gmail; if I log into my email on a new device, I am prompted to prove my identity on an entirely different device, using another app—in my case, it was opening the YouTube app on my iPhone. I have to enter my password on the first device and then switch to something else that belongs to me—my phone, to prove that I am who I say I am. In a world where cell phones have become an extension of us, can you even call this

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an inconvenience? The tech companies have moved beyond convenience and are focused solely on safeguarding each and every transaction—regardless of the perceived difficulty.

In 2022 Apple Inc. saw 650 million weekly visitors to their app store, with $1.1 trillion in total annual billings.9 Imagine the loss Apple could experience if they reduced or eliminated the use of MFA for app store purchases.

And while you think it might be silly to safeguard a $1.99 purchase, it’s more about the message Apple sends to the fraudsters—look elsewhere for your illicit activity. If I’m a fraudster, am I going to waste my time trying to bring down a tech giant like Apple? I’ll probably look to an industry that lacks basic safeguards and has a more antiquated approach to business.

Up until 2019, title fraud was virtually nonexistent in real estate transactions. In a post-COVID world, we’ve seen over 100 fraud cases in the last 3 years; as a result, title companies and lenders are scrambling to get in front of this issue—but at times it can feel like an insurmountable problem. In 2022, the average Canadian home price was approximately CAD$704,000, with 498,269 units sold nationally.10 Mortgage refinances aside, that’s close to 500,000 transactions safeguarded by two pieces of government-issued photo ID that need only be visually inspected.

It’s pretty astonishing to think you might be buying a home from someone who had to prove it was theirs with an easily faked ID—how does that make you feel? Better yet, how do you think your clients would feel knowing the home they bought doesn’t belong to them?

What is often underestimated is title fraud is never a quick resolution.

Police agencies often struggle with the complex nature of those crimes and lack the expertise to hunt down the criminals for prosecution. While some of those cases are title insured, it still takes a great deal of time to be rectified through the Courts—the toll it takes on the homeowners is extreme, both emotionally and financially.

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With 14.6 million homes in Canada, 12 that’s 3.4 million homes that are a probable target for equity theft in the coming years. We see those frauds frequently; a fraudster steals the homeowner’s identity, applies for a mortgage, and takes out large sums of equity—right out from under the homeowner. It’s a scary thought when you factor in that many people rely on the equity in their homes to fund their retirement years—will it be there when they need it most?

Fraud has proven to be a national problem that requires a national solution. While real estate fraud first became rampant in the Greater Toronto Area, we’ve seen it in various forms nationwide. In fact, two of the most expensive title insurance fraud claims we’ve had to date have come from British Columbia at $3.5 million and $2.5 million. An even scarier plot twist is how certain jurisdictions handle title fraud differently.

Have you ever heard the adage “possession is nine-tenths of the law?”

While it seems far-fetched, it holds in some Canadian jurisdictions. Some land title Acts rule that the new title holder owns the property—even if the innocent party obtained it through a fraudulent transaction. If the original property owner doesn’t have a title insurance policy to protect their legal ownership, they could end up in a lengthy Court battle to regain ownership or get compensated for a property they legitimately owned before the fraud occurred.

Many of us strive for home ownership, and one of the most significant opportunities for fraud lies within the 23.3 per cent of Canadians who own their homes free and clear.11 It’s easy to surmise that many of those individuals fall within an ageing bracket, a portion of our population particularly vulnerable to title fraud as many lack the technical knowledge to reduce their exposure to identity theft. They are often chosen as targets because they have large amounts of equity in their homes and often lack safeguards to alert or protect them against fraudulent crimes.

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…we’ve left it wholly unchecked, and now the fraudsters recognize they have to act before the government steps in.

Many of those homeowners purchased their homes before title insurance entered the Canadian market.

We should be especially concerned about educating that segment on the protection an existing homeowner title insurance policy (purchased through any of the leading title companies) can provide them. Leaving their financial future unprotected could create a national crisis we’re not equipped to handle.

Sophisticated organized crime rings have made it their full-time job to access stolen identities off the dark web and then manufacture fraudulent IDs. The rapid growth and use of artificial intelligence (AI) has also intensified this issue. What previously would have taken significant effort and skill to obtain is now generated through AI with the press of a button—that further accelerates the need for an immediate solution.

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That is the reality of Canadian real estate in 2024—we’ve left it wholly unchecked, and now the fraudsters recognize they have to act before Canadians revolt and the government steps in. But when will that be? What is the magic number that will bring about change? Do we have to reach $100 billion in stolen funds for someone to demand change?

A recent study found 15 billion stolen credentials on the dark web, including username and password pairs and online banking credentials.13 One of the biggest fraud trends in 2023 was vendor impersonation fraud. While we see that in various formats, it’s often unoccupied properties that are the easiest target. The homeowner resides overseas and the fraudster realizes it’s a vacant property. Before the homeowner realizes it, a fraudster has stolen their identity and sold the property out from under them. It highlights the importance of including MFA on both sides of the transaction—we need to ensure all parties are who they say they are.

Shockingly, we’ve reached this astronomical level of fraud without earlier intervention. I imagine a significant portion of the population isn’t aware fraud has reached that level, and of those that do know, do they understand a solution exists that could prevent most frauds if implemented across the board—even beyond real estate?

While I imagine we’ll eventually get to a place where MFA is mandated across all financial transactions, it’s important to protect every real estate deal that comes across your desk—from the smallest plot of land to the multimillion dollar homes, not only with title insurance but with multi-factor authentication. Every major title insurer either owns a multi-factor authentication ID service or is partnered with one—you can and should order it with every deal.

Multi-factor authentication is a method of verification that is 28 years old and successfully reduces 99.9 per cent of account attacks.

JOHN RIDER is Senior Vice President, Retail and Commercial Title Insurance, Chicago Title Insurance Company.

Photo: istock

1 The Canadian Anti-Fraud Centre (2023, June 30). The impacts of fraud so far this year. https://www.antifraudcentre-centreantifraude.ca/index-eng.htm 2 The Royal Canadian Mounted Police (2023, July 17). Canadian Anti-Fraud Centre’s fraud reporting datasets mark first RCMP addition to Open Government Portal. https://www.rcmp-grc.gc.ca/en/news/2023/canadian-fraud-centres-fraud-reporting-datasets-mark-first-rcmp-addition-open-government 3 The Canadian Anti-Fraud Centre (2023, June 30). Funds recovered with CAFC assistance. https://www.antifraudcentre-centreantifraude.ca/index-eng.htm 4

Astra (2023, October 20). 160 Cybersecurity Statistics 2023.

https://www.getastra.com/blog/security-audit/cyber-security-statistics/ 5

GooglePatents (1996, May 21) European Patent Application.

https://patentimages.storage.googleapis.com/66/97/05/9625116838ab96/EP0745961A2.pdf 6

National Security Archive (2019, January 9) Cybersecurity: When Hackers Went to the Hill—Revisiting the L0pht Hearings of 1998 https://nsarchive.gwu.edu/briefing-book/cyber-vault/2019-01-09/cybersecurity-when-hackers-went-hill-revisiting-l0pht-hearings-1998

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Microsoft (2019, August 20) One simple action you can take to prevent 99.9 percent of attacks on your accounts.

https://www.microsoft.com/en-us/security/blog/2019/08/20/one-simple-action-you-can-take-to-prevent-99-9-percent-of-account-attacks/#:~:text=By%20 providing%20an%20extra%20barrier,be%20enough%20to%20gain%20access.

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IBM. Data breach action guide. https://www.ibm.com/reports/data-breach-action-guide

9 Apple (2023, May 31) App Store developers generated $1.1 trillion in total billings and sales in the App Store ecosystem in 2022. https://www.apple.com/newsroom/2023/05/developers-generated-one-point-one-trillion-in-the-app-store-ecosystem-in-2022/ 10 Statista (2023, September 7) Average house price in Canada from 2018 to 2022, with a forecast until 2024. https://www.statista.com/statistics/604228/median-house-prices-canada/#:~:text=The%20average%20Canadian%20house%20price,reaching%20 approximately%20685%2C000%20Canadian%20dollars 11 Government of Canada (2023, June 13) FCAC Report: The financial well-being of Canadian homeowners with mortgages. https://www.canada.ca/content/dam/fcac-acfc/documents/programs/research-surveys-studies-reports/financial-well-being-mortgages.pdf 12 Statista (2023, January 31) Volume of homes in Canada from 2015 to 2018 with a forecast until 2023. https://www.statista.com/statistics/1072334/number-of-homes-canada-timeline/#:~:text=Number%20of%20homes%20in%20Canada,with%20a%20forecast%20 until%202023&text=In%202018%2C%20there%20were%2013.82,reach%2014.6%20million%20by%202023

13 Forbes (2020, July 8) New Dark Web Audit Reveals 15 Billion Stolen Logins from 100,000 Breaches https://www.forbes.com/sites/daveywinder/2020/07/08/new-dark-web-audit-reveals-15-billion-stolen-logins-from-100000-breaches-passwordshackers-cybercrime/?sh=53f048a6180f

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Did you know there are over 15 billion stolen credentials on the dark web?1 Ensure all parties are who they say they are with VerifID™ What does VerifID check?

• Checks against hundreds of compliance data points • Checks against hundreds of fraud data points • Verifies government-issued ID • Verifies identity data in the credit file • Verifies the account holder’s cell phone information • And more!

The next time you meet a buyer, vendor, or borrower—stop and think.

Are you sure they are who they say they are?

Amy Chen Regional Manager 604.355.6788 Amy.chen@ctt.com

David DeNeire Regional Manager 236.330.4936 David.deneire@ctt.com

Chicagotitle.ca VerifID is a service by Chicago Title Insurance Company Canada. This material is intended to provide general information only. For specific coverage details and exclusions, please refer to the applicable policy terms and conditions. Copies are available upon request. Some products and availability may vary by province. Prices and products are subject to change without notice.

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ReliaQuest

FRAUD

Good People Can Do Bad Things:

CHRISTOPHER AREHART

Debunking Common Myths about Dishonest Employees In November 2021, a former church bookkeeper was sentenced to 5½ years in federal prison.1 She pleaded guilty to two counts of bank fraud in connection with her embezzlement of over $450,000. As church bookkeeper, she had access to the church’s general ledger and bank statements and was able to conceal the fraud for nearly 6 years.

Victims of dishonest employees are often surprised to hear their stories are very similar to the stories of others: A trusted, longterm employee with a sterling background shockingly betrays the organization’s trust and uses the organization’s money for their own self-interest.

Theft and embezzlement by employees are not aberrations, but an unfortunate reality. They can occur at organizations of any size and type, from the smallest charity to the largest multinational company. By understanding the circumstances under which fraud takes hold, you can help your organization be better prepared to spot and prevent fraud in the future.

In this article, we’ll look at the specific circumstances that contribute to fraud as well as the myths surrounding financial crime. We will end with some guidelines that can help you prevent fraud.

The Fraud Triangle: Three Legs to a Stool Embezzlement is a calculated crime that flourishes under specific circumstances. There are three legs to the proverbial stool on which fraud sits. y An opportunity to take advantage of a situation y A motivating factor, such as incentive or pressure on the individual y A rationalization the person uses to justify the fraud as acceptable The removal of one or more of those elements reduces the likelihood of fraud occurring within an organization.2 To better understand why “good people do bad things,” let’s first debunk some common myths about the causes of fraud within companies and organizations.

Photo: istock/Andrey_Popov

Myth #1: A clean background precludes fraud.

Fact: Most employees who commit fraud are first-time offenders and have no criminal record. Only 6 per cent of perpetrators had a prior fraud conviction. Because most employees begin their scheme once employed, initial background checks and vetting may be less effective than you think.3 Takeaway: While useful for all hires, background and credit checks are more effective if they are performed on employees who are in positions of authority and those who have access to the money or accounts of the company. Those tools help the employer screen for financial pressures, such as high debt, overdue payments, and collections actions. Those are potential incentives for the employee to take advantage of the organization and embezzle funds.

Myth #2: We can detect fraud when the auditors and management review the books and accounts.

Fact: Sadly, occupational fraud is rarely detected by traditional external auditors or management reviews. In fact, fraud is most commonly detected by tips (42 per cent of the time), usually from other employees.4 Takeaway: Employers cannot rely solely on formal audits and management reviews to detect embezzlement.

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hotlines have half the amount of fraud losses as those without hotlines. In addition, hotlines allow organizations to detect fraud more quickly.5

…your organization is at higher risk for fraud if you allow the same employee to oversee reconciling bank statements while also handling deposits or making payments for the company.

Myth #3: If we empower our employees and trust them, they will always execute their duties faithfully.

Fact: Opportunity to steal usually presents as a flaw or weakness in internal controls. Too much trust in one person can be a serious concern. For example, allowing an employee to control an entire process (such as approving suppliers as well as paying their invoices) creates the conditions for an employee to commit dishonest acts.

It is often the very employees responsible for handling funds and accounts who commit fraud. Those employees can abuse their position of power and steal money by exploiting a weakened control. For example, your organization is at higher risk for fraud if you allow the same employee to oversee reconciling bank statements while also handling deposits or making payments for the company.

Creating an environment that encourages people to report concerns and tips via a hotline can help spot fraud and stop it in its tracks. On average, organizations with tip

Takeaway: Trust is critical to a healthy employeremployee relationship, but too much trust—without effective checks and balances—puts too much opportunity in the hands of the employee.

Keys to Prevention It’s important to remain vigilant to stop those activities from sabotaging your organization. Fortunately, there is hope for the organization that lowers the risk of dishonesty from within its ranks.

By focusing on the three legs of the stool—opportunity, motivation, and rationalization—organizations can make it more difficult for fraud to find a seat at the table.

Fraud's 3-Legged Stool Opportunity

Motivation

Rationalization

y A solid, documented internal control framework built with checks and balances on all functions reduces opportunity. y Place additional scrutiny on key departments where fraud is most likely to occur, including finance, payroll, and accounts payable/ receivable. y Strong ethical and moral codes serve to support, but not replace, separation and division of financial tasks.

y Maintaining a culture of appreciation with a strong tone at the top demotivates fraud. y Evaluate compensation regularly, especially in the face of rising costs for workers. y Promote the value of hotlines and whistleblowers—they are a powerful deterrent and effective at reducing severity and duration of fraud.

y Create clear and concise codes of conduct; train, enforce, and monitor constantly. y Create clear alignment of employees’ responsibilities with organizational objectives. y Instill ownership of decisions through both positive and negative consequences. y Create a culture of personal accountability and a positive work environment.

ttps://www.justice.gov/usao-ndtx/pr/church-employee-sentenced-5-yearsh embezzlement accessed January 30, 2023 2 The author is indebted to the work of criminologist Donald R. Cressey and his seminal writings that document the “fraud triangle” (Other People’s Money: A Study in the Social Psychology of Embezzlement, Patterson Smith reprint series, 1973).

3 Social Psychology of Embezzlement, Patterson Smith reprint series, 1973).

4 https://legacy.acfe.com/report-to-the-nations/2022/ 5 https://legacy.acfe.com/report-to-the-nations/2022/ 1

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BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

CHRISTOPHER AREHART is senior vice president and product manager of crime, financial fidelity, kidnap/ransom and extortion, mail and workplace violence expense insurance for the North America Financial Lines division of Chubb Ltd.

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FRAUD

Dealing with Common NearFraud Situations Practitioners May Encounter Î All legal practitioners, BC Notaries included, need to avoid becoming unwitting agents of someone with a dishonest plan, whether it be a client or someone manipulating a client.

One of the most common ways to fall into that trap is to proceed unquestioningly to draft a Will, Power of Attorney, or other legal document in the face of many red flags that point to the drafting instructions having resulted from undue influence exerted on the client by a family member or other third party.

Courts are sharply critical of Notaries and lawyers who overlook or are willfully blind to signs that should have raised their suspicions about a legally dubious set of drafting instructions, so it is important to be alert for red flags of undue influence. Legal practitioners have an obligation to satisfy themselves that their clients are giving instructions freely and independently if there are circumstances that suggest they may not be doing so.

Undue inf luence consists of imposing pressure on a person or deceiving them into performing a legal act like making a Will, granting a Power of Attorney, or transferring property when the act does not represent the genuine wish or intent of that person, but instead reflects the intentions of the influencer.

Courts are sharply critical of Notaries and lawyers who overlook or are willfully blind to signs that should have raised their suspicions about a legally dubious set of drafting instructions, so it is important to be alert for red flags of undue influence.

It requires more than mere persuasion. Instead, it requires dominating the mind and actions of the other person to the extent it prevents the other person from acting freely. It is not essential for the influencer to benefit personally. It is sufficient if the victim is led to do what the influencer wants because of the influencer’s pressure or deceit.

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K E L LY M E LN Y K

G R E G O RY B LU E

Undue influence is similar to fraud because, if it succeeds, it results in a legal document or completed transaction that the influencer can point to in order to deceive others about the true wishes or intentions of the victim. In addition, one of the most common forms of undue influence involves a fraud perpetrated on the victim.

Sometimes referred to as “fraudulent calumny,” it consists of leading the victim to believe in a false set of facts about a family member or other person close to the victim.

The deliberately supplied misinformation causes the victim to act according to the influencer’s wishes, such as by changing a Will to disinherit a family member or grant a Power of Attorney that the victim would not have granted if the victim’s mind had not been poisoned by the influencer.

Some obvious warning signs that undue influence may be affecting a client’s instructions and potentially could affect the legal validity of a document the practitioner is being asked to prepare are y a drastic change in a Will for no apparent reason; y family members insisting on being present in meetings with the client; or y anxiety and agitation on the part of the client when discussing the document or transaction in question.

There are many other red flags that should raise a practitioner’s “index of THE SCRIVENER | WINTER 2023

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FRAUD

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BC NOTARIES ARE RESPECTED IN THEIR COMMUNITIES. 36

suspicion” that undue influence may be in play and should lead to some tactful inquiries to investigate the possibility.

A long list of potential red flags for undue influence is contained in a publication of the BC Law Institute (BCLI), “Undue Influence Recognition and Prevention: A Guide for Legal Practitioners.”

The Guide also contains recommendations for tactful probing to enable practitioners to make an informed judgment call on whether to accept and proceed with instructions when there is some reason to suspect there is undue influence going on in the background. The Guide is available as a PDF without cost from the BCLI website at www.bcli.org.

Joint ownership may also be pursued for the wrong reasons, possibly as a result of undue influence by another party or a mistaken (or not so mistaken) belief that the asset will be passed along to those whom the transferor intended ultimately to receive it.

Using joint ownership between spouses is a highly common practice, whether the assets are real property, bank accounts, cars, or investments.

Spouses typically work together for a common family purpose and the right of survivorship resulting from joint ownership makes sense in that context.

Placing an asset into joint tenancy can create unintended consequences, even when the joint owners are spouses.

That is especially true because of amendments that came into force in May 2023 to the Family Law Act, SBC 2011, c 25. Section 81.1 states that both the presumption of advancement and presumption of resulting trust are no longer to “be applied in questions respecting the ownership of property as between spouses.”

That means when a spouse is made a joint owner, there no longer remains a presumption that such a transfer is a gift, which may have implications for using joint ownership as an estateplanning tool.

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With the increase in blended families, the true intent behind a transfer into joint tenancy and associated right of survivorship is coming into question frequently. In blended family situations, joint ownership may not achieve a transferor’s goal that the new spouse should benefit from the asset but will eventually pass the benefit to the children of the transferring spouse.

We are also seeing situations of a spouse’s parents being added to title to secure financing for adult children to purchase real property, raising questions about survivorship on the passing of a parent, or whether the parents’ contribution was a gift or a loan.

Joint ownership may also be pursued for the wrong reasons, possibly as a result of undue influence by another party or a mistaken (or not so mistaken) belief that the asset will be passed along to those whom the transferor intended ultimately to receive it.

In another scenario, an adult child may be placed on title as joint owner for convenience if the parent is receiving care from the adult child, but a parent may also be unduly influenced by an adult child to make such a transfer.

Litigation over whether the other adult child was really intended to benefit from the right of survivorship

.H.

Cadman, George K.C.* E.H. Cadman, K.C.*

or whether the transfer into joint cadman@boughtonlaw 604 647 4123 | gcadman@boughtonlaw.com .com ownership was made for the benefit of verthe40 years’ With over 40 years’ experience, estate can arise, as the other adult experience, children see the main asset counsel now passing ides wise to guide George provides wise counsel you to guide you by way of the right of survivorship solution of and any real estate, toward resolution of any real estate, outside the estate of the parent. regulatory porate, or business, dispute. corporate, or regulatory dispute.

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through a Law When questions of survivorship or

of interests being held by a joint owner in trust for the other are not addressed at the outset, litigation about who was intended to benefit from the assets on death can easily arise.

Corporation *Practising through a Law Corporation

Uniquely West Coast™ Boughton 1/6 2022.indd 1

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Challenges to whether a joint interest was intended as a gift have been increasing. The amendments to the Family Law Act removing the presumption of advancement between spouses may result in greater uncertainty and more frequent challenges.

Clients must understand that placing someone as a joint title holder to real property or naming them as a joint bank account holder nominally creates the right to survivorship, but more steps may need to be taken to ensure the right of survivorship takes effect as intended.

Executing a deed of gift close in time to the transfer, but before it occurs, would provide more substantial evidence of the transferor’s intention to gift the right of survivorship, when that intention is actually present.

In a blended family situation, the transferring spouse should understand that the transfer to the other spouse into joint tenancy could result in a disinheritance of children if the intention is to give the recipient spouse the right of survivorship. Discussing alternate options to achieve the desired outcome and the intent behind the transaction with the client, along with detailed notes of your discussion, could help to avoid or assist in future litigation.

GREGORY G. BLUE, KC, is a Senior Staff Lawyer for the British Columbia Law Institute.

KELLY MELNYK is the CCEL Director. https://www.cle.bc.ca/aboutcourses/

Trevor, Jackson and Chuck E. Todd providing excellent legal services in contested wills, trusts and estates for over 50 years. disinherited.com rttodd@disinherited.com | t. 604.264.8470

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Are Stratas Immune to Fraudulent Predators?

I A N C A LL AWAY

Î Fraud was the most common crime measured, ahead of personal and household property thefts according to Canada’s 2019 General Self-reporting Safety Survey as analyzed by Perreault (2023).

In the survey’s prior 12 months, fraud impacted 2.5 million Canadians, representing 7.8 per cent of the Canadian population. This same survey noted the average individual loss over the preceding 5 years was $5,000. (Perreault, 2023).

According to the Canadian Anti-Fraud Centre (CAFC), in 2022 the three most reported fraud types were y phishing (attempting to acquire a person’s sensitive data); y extortion; and y personal information scams.

The three most reported frauds with the highest levels of victim losses were investment scams, romance scams, and spear phishing. The reported fraud and cybercrime losses totalled $530 million.

What Is Fraud?

BC’s Auditor General’s Risk Management Survey Report (2021) described fraud as “any intentional act or omission designed to deceive others, resulting in the victim suffering loss and/or the perpetrator achieving a gain.”

Under Part X of the Criminal Code of Canada (CCoC), Fraudulent Transactions Relating to Contracts and Trade, fraud occurs when “Every one who, by deceit, falsehood, or other fraudulent means…defrauds the public or any person, whether ascertained or not, of any property, money, or valuable security or any service, (a) is guilty of an indictable offence and liable… .” (section 380(1))

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BC NOTARIES ASSOCIATION | bcnotaryassociation.ca

In addition to 13 Sections in Part X covering various aspects of fraud, the CCoC incorporates a number of other sections that could relate to strata matters. y y y y y y y y y

False Pretense (361) Forgery and Offenses Resembling Forgery (366) Gaming and Betting (201) Interception of Communications (184) Invasion of Privacy (183) Laundering Proceeds of Crime (462.31(1)) Terrorism (83.01) Theft and Possession (657.2(1)) Theft (322) Criminally, fraud has two requisite elements,

y a guilty mind (mens rea), and y a culpable action (actus reus).

While mens rea might imply a psychological understanding, more practically in criminal law it is the perpetrator’s awareness of breaching a law, the actus reus.

Lacking one of those two fraudulent requisites, the intent to cause harm or deceit, misunderstandings, or mistakes tend not to meet the test for fraud.

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Reporting Fraud Challenges Both Perreault (2023) and Cotter’s Criminal Victimization in Canada (2021) found the higher the education and/or household income, there is an increased risk of being a victim of fraud. While there are provincial differences in reporting fraud, Perreault observed that those having attended university were 2.5 times more likely to report than were those without a high school diploma. Also, the greater the known loss, the higher the probability of reporting.

Perreault (2023) also noted, “Fraud is one of the crimes least likely to be reported to the police” and projected that over the prior 5-year period, only 11 per cent reported their fraud experience to the police. The CAFC estimated that only 5 to 10 per cent of victims report being victimized by fraud.

In criminology, two recurrent reasons for not reporting frauds were the victim’s rationalization that such “white collar” crimes were nonviolent and thus less harmful, and also the victim’s embarrassment at having been duped.

A third common reason for not reporting fraud, and one that is particularly applicable to stratas, is the victim(s) being unaware of having been defrauded.

In the absence of such incomplete reporting data, Perreault concluded, “Relatively little is known about the true extent of fraud in Canada and the full implications for its victims.” As a result, the true magnitude of fraud’s “dark figure” is unknown.

Projecting Fraud’s Quantum The Association of Certified Fraud Examiners (ACFE, 2022) globally analyzed over 2,000 occupational frauds.

While the data found US$117,000 was the mean fraud loss prior to detection, of the top five industries, Real Estate had the largest median fraud loss of $435,000.

In tracing frauds to occupational areas, the ACFE found y 11% committed by Executives, y 12% from Accounting, and y 15% from Operations.

An overall conclusion by the ACFE is that on an annual basis, organizations lose 5 per cent of their revenues to fraud.

While there are geographic differences within BC, Statistics Canada’s 2020 data reported the average condo size was 849 square feet with an operational cost of $0.45 per square foot per month: y Producing monthly costs that total $382.05 per strata lot; y Generating $41,643.45 per month or $499,721.40 annually based on an average of 109 units per BC condo building; and then

y Applying the ACFE’s 5 per cent revenue loss to fraud, such an “average” building’s annual “dark figure” fraud loss would be $24,986.07 for the building or $229.23 per strata lot owner.

Actual Stata Dollar Losses to Fraud While British Columbia’s government reports approximately 1/3 of BC’s population lives in strata housing, Statistics Canada (2021) reported that 51.8 per cent live in apartment or row housing dwellings. Yet, to date, there appear to be only periodic strata fraud reportings rather than an analytical assessment of the extent of fraud’s financial impact on BC’s stratas.

Over the past few years, BC newspaper articles published examples of dollars bilked from stratas: y y y y

$160,000 by council member (2013); $200,233 from 140 illegal banking transactions (2016); $150,000 by pseudo-accountant serving as treasurer (2022); over $100,000 transferred to nonexistent companies (2023).

Elsewhere in Canada there have been other reports.

y $750,000 siphoned by former condo Board member (2018); y $970,000 lost in Toronto Title Fraud Sale (2023); y $1 million misappropriated by Ontario bookkeeper/ administrator; y $2 million stolen by Alberta property manager before fleeing to the UK (2020); y $13 million condo fraud results in lawyer’s 3.5-year jail sentence for facilitating client's fraudulent scheme (2017); y $20 million misappropriated by Ontario property management firm’s President (2023); y Companies and their owners charged with conspiracy to commit fraud by rigging condo bids in Metro Toronto (2021).

Who Could Be Strata Fraudulent Perpetrators?

In their 184-page Report to BC’s Cullen Commission (2022), Professors Maloney, Somerville, and Unger (2019) concluded, “the incident rate for several ‘red flag’ ownership indicators were higher in condominium units than in single-family homes and that such incidence rates were even more skewed with higher value properties and geographic areas… .”

The Ontario’s Association of Condominium Managers (2021) piece “Is Fraud Really A Problem in Condominiums?” highlighted three key points. y “It’s no secret our industry can be a magnet for fraudulent activity. It is not that there is something inherently bad about the people in our industry or the Board members who hire us. y The real problem lies in the way condominiums are set up. You combine elected representatives with the power to tax their subjects. y With little to no oversight . . . you get mixed results.”

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In the current national shortage of licensed property managers, a simplistic assumption is that fraudulent predators are members of a strata council, and in particular those with cheque-signing and/or authority for invoice payments.

There is a tendency to assume only unaffiliated individuals might be involved with strata frauds by exploiting either the requisite monthly cash flows or tapping into their Contingency Reserve Fund(s).

Criminologist Donald Cressey’s classic Fraud Triangle conceptualizes the factors that explain fraud: Incentive, Opportunity, and Rationalization. In their 2004 CPA Journal article, criminologists Wolfe and Hermanson expanded Cressey’s Fraud Triangle to a Fraud Diamond by adding “Capability.”

Even though the Criminal Intelligence Service of Canada (CISC) wrote in its 2021 Public Report on Organized Crime that “Canada is one of the least-corrupt countries,” along with Ontario and Quebec, BC dominates Canada with over 130 communities of criminal entrepreneurs and is home to the majority of money launders. Additionally, even though Canada had a favourable Criminal Actors’ score of 3.88, 3 of the 4 Criminal Actor groupings were above that score: 5.0 Mafia-style Groups; 4.5 Foreign Actors; and 4.0 Criminal Networks.

The ACFE’s global fraud survey found 85 per cent of those committing fraud had one or more pre-existing red flags characterizing either the Fraud Triangle's or the Diamond’s “Incentive” vector. y Family: Addiction(s); Child problem(s); Divorce; Relative problem(s) y Financial: Bills accumulating; Creditor actions; Lifestyle excesses; Taxes outstanding y Workplace: Closeness to vendors; Controlling duties; Defers vacations; Hoards duties; Limits information; Slags protocols and rules; Processes Subverted In each strata’s environment, there are seven potential sources of financial predators having Opportunity and Capability, ranging from the Owners and expanding to predators outside the strata’s more traditionally observable groupings.

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In its Public Report on Organized Crime (2022), CISC stated “A key question for senior law enforcement decision-makers is to decide what issues matter most and where resources should be allocated.” Within the context of strata fraud, such a benefit-cost analysis may well explain investigators focusing on real estate’s “big elephant hunting” rather than examining a "slow-moving tortoise" like a strata.

A third explanation is that the discovery of fraud within a strata is more reactively anecdotal, rather than proactively analysed within a framework focusing on the Strata Property Act (SPA).

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Strata Property Act, Assets and Money

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While some fraudsters are motivated by psychological factors such as deception and power, most are driven by access to money, whether in the form of currency or assets that can be converted to currency.

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Under the SPA, the strata council exercises the strata corporation’s powers and duties to manage and maintain its common property and common assets (sections 3 and 4).

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Potential Strata Predator Sources While the newspaper reporting of strata frauds generally cites single perpetrators, the ACFE’s global study found over the prior 10 years (2012 to 2022) there had been a 16 per cent drop in frauds (58% to 42%) committed by a single perpetrator and a corresponding 16 percent increase (42% to 58%) in frauds committed by two or more collaborators.

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Investigating Strata Fraudulent Perpetrators?

A second explanation for investigators ignoring strata fraud is due to the successful efforts of criminal perpetrators to disguise their actions.

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With strata predators’ abilities to remain unobtrusive, there is also a likelihood such persons may have ties either to some form of Organized Crime Group and Network or to Foreign Actors with ties to Terrorism.

Based on unit entitlement, owners must contribute their share of the budget which, as prepared by a strata council acting honestly and without a conflict of interest, is presented at the Annual General Meeting (AGM) and, subject to meeting its quorum requirements and passed by the majority of eligible owners present in person, electronically, or represented by proxy at the AGM identifying proposed expenditures from an Operating Fund and their

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Contingency Reserve Fund, taking into account unauthorized expenditures and dealing with surpluses and deficits, including those for levies (sections 31, 32, 46, 48, 49, 56, 92, 93, 94, 95, 96, 97, 98, 99, 103, 105, 108, 109).

Without a vetting requirement, there is a collegial tendency to assume those performing strata functions are doing it solely for the best interest of the strata.

Two statements from Cullen’s Report, Money Laundering in British Columbia (2022), might be described as a "fraudster's formula” containing two prerequisites whereby criminals, y “…are rational actors who are aware of the different regulatory requirements in different jurisdictions, (page 10); and y …exploit human and systemic vulnerabilities…” (page 1624) Chris Lynam, the CAFC’s Director General stated (2023-02-27): “As we see the amount of money lost to fraud continues to increase, our duty to protect each other grows more and more important.”

The Strata Property Act—Exploiting a Baker’s Dozen of “What Ifs” 1. Low Participation: While there is a diminishing voter participation rate dropping from federal to provincial to municipal elections, even with the 1/3 quorum requirements, many stratas have amended their bylaws to an even lower threshold commencing a fixed period after the scheduled AGM start-time, resulting in a disproportionate few controlling the majority.

2. Ballot-Harvesting: Recognizing that many owners have little interest in attending an AGM, some owners make it a practice of collecting proxies, thereby creating a forum whereby only a few shape the financial accountability.

3. Council Profiles: While there are disclosure requirements when running for government positions that can be vetted, there is no such strata requirement so that sometimes the boldest bloviators are elected to the strata council, thereby taking control of assets and finances.

4. Affinity Assistance: Without a vetting requirement, there is a collegial tendency to assume those performing strata functions are doing it solely for the best interest of the strata.

5. Accountant’s Authority: In BC, the word “Accountant” is not protected and, as Cullen (2022) noted, 2/3 of BC’s 89,000 individuals working in such a capacity are not regulated.

6. Financial Audits: Even though the word “audit” can be injected to imply financial authenticity, CPA Canada notes that of the three levels of audit, there are significant differences in their degrees of information authenticity.

7. Financial Statements: The strata’s financials are prepared by a council member and/or a property manager.

Many owners don’t understand the financials or they prefer to sit back and have others question the accuracy of the

documents. Note: A Harvard study (2009) found that only 38 per cent of C-suite executives and supervisors passed a junior-level finance test.

8. Maintaining Assets: Even though the strata council is also responsible for common assets, there is no requirement to provide present owners with a list of those assets. Without published documentation, various assets may “disappear” over time. “Disappearance” is potentially a violation of the Nemo Dat legal principle: You cannot give away what isn’t legally yours.

9. Maintaining Common Property: While the strata plan will identify common property, within such descriptors are parking stalls that can represent a significant cash sum if “sold,” albeit illegally.

10. Ownership Participation: While the SPA is relatively silent on the frequency, notification requirements, and the format or detail of “Minutes,” unless the strata council respects observers and/or encourages input, decisions can me made in an ownership vacuum unless the council respects the SPA 34.1 right to a hearing.

11. Money Laundering: With the number of financial transactions involving the strata corporation, there are ample opportunities for owners to “overpay” monies owing to the strata corporation and then requesting a refund of such an overpayment by, for example, applying SPA 109 with the sale of a strata lot.

12. Legacy Quotation Protocols: Although the construction industry has structured quotation protocols, there are no such strata corporation requirements; sometimes owners are unaware of the comparative parameters or are even asked to approve, by a ¾ vote, expenditures that have already been spent on vaguely described “projects.”

13. Avoiding Consulting and Legal Advice: While one of the more frequently attacked budgetary strata-corporation line items is related to “consulting and/or legal expenses,” that item might better be considered defensive advice, as long as such advice is appropriately reported to the owners.

I A N C A L L AWAY, MA, MEd, PhD(c), RHU, BCFE, TRiP, CEA, CFI, is a Strategic Analyst. www.Iancallaway.ca

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Why Ugly Passwords are Better

A A R O N G U I LLE N

cent from the year before. Depending on the scam, the median loss Canadians encountered was between $102 and $5500, so the financial stakes are high.

Curious about the top 10 riskiest scams in Canada? Head over to bbbmarketplacetrust.org/canadariskreport. Keep your eyes peeled for the updated list dropping in March 2024.

Stay savvy, folks!

How can you protect yourself?

Having “ugly” passwords in place acts like a fortress for your accounts, making it harder for scammers to weasel their way in, preventing unauthorized transactions, and safeguarding your hard-earned funds. Scammers love a good phishing attempt or social engineering ploy to trick you into revealing your passwords.

Photo: BBB & Getty Images

Î Is your password difficult to crack?

On behalf of the Better Business Bureau (BBB) serving Mainland BC and Yukon Territory, I'm urging all of us to step up our password game and make them more, well, ugly. Why? Because the uglier is the better when it comes to keeping hackers and scammers at bay.

We get it, keeping track of passwords is hard. According to password management company Nordpass, the average person juggles 70 to 80 passwords!

Wrangling all those passwords can be a real headache, making it a challenge to create and remember strong and unique ones.

Shockingly, the top 100 common passwords in Canada for 2023 included gems like “123456,” “password,”

42

“hockey,” “canada,” and “qwerty.”

What’s worse, based on a survey by the data insights company Statistica, 25 per cent of Canadians reported they change their passwords less than once a year, Here’s the truth. Knowing how to create, change, and use passwords safely is one of the simplest and most effective ways to protect yourself from having your online accounts broken into by hackers. By making an ugly password using symbols, numbers, and words that aren’t directly tied to your identity, you are taking one easy step to protect yourself from fraud.

Financial loss from scams is also on the rise. According to the most recent BBB Risk Report, the median dollar loss for all reported scams is $300, up 20 per

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But fear not! Follow these tips to setup a robust and ugly password.

1. Use a passphrase.

So here's the deal: Forget about those plain old single words; let's spice things up with a passphrase. Make it a little novel, around 20 characters, toss in some random words, numbers, and symbols. For instance, "I was a Canucks fan in 2010" can transform into the uncrackable iw@$Canuck$F@n/10.

2. Use multiple passwords.

Now, onto the golden rule: Never, and I mean never, use the same password for all your accounts. Especially the heavy hitters like your bank, credit cards, or anything that holds your legal, tax, or medical info. It might be

tempting to have one password to rule them all, but think of it this way: It's way easier for hackers to smash through one wall than a bunch of 'em. One cracked password means they've got the keys to your entire online kingdom.

3. Use multi-factor authentication (MFA).

Ever heard of the dynamic duo?

No, not Batman and Robin. I'm talking about multi-factor authentication or MFA. It's like having a secret handshake for your digital life. You've got your password and then there's this extra piece of info—usually a code sent to your phone or generated by an app.

Even if someone somehow cracks your password, they're still stuck at the front gate without the second piece.

4. Change your passwords regularly.

Okay, I get it. Changing passwords is a bit of a chore but it's one of the best ways to keep your private stuff, well, private. Set a date with your passwords at least twice a year. And why not start today? While you're at it, clean house.

Close those old accounts you never use, especially if they're tied to credit cards or bill payments. And don't forget to hit the delete button on those inactive email and social media accounts. Curious about how strong your fortress is?

Check out passwordmonster.com and see how long it takes to crack your code.

5. Consider a password manager.

Keep a written list if you want that old-school vibe, but if you're afraid of losing it (who isn't?), consider a trusty password manager. It’s like a vault for all your codes and security question answers. Just remember, even superheroes need protection, so slap on a superhero cape with a strong password for your manager.

6. Ditch the easy passwords you’ve been using.

Your pet's name, mom's maiden name, favourite team are basically open books for hackers. A robust password has at least 12 to 14 characters and a mix of uppercase and lowercase letters,

LLP

MACKENZIE FUJISAWA LLP BA R R I ST E RS & S O L I C I TO RS

Photo: BBB & Getty Images

numbers, and symbols. According to the Government of BC, the more variables, the better. A password like "Apple" with 5 digits and mixed letters takes a measly 25 seconds to crack. But something like "B3tterBu!sn3ssBure@u" with over 9 digits, a combo of numbers, symbols, and a variety of letters? That bad boy would take at least 1,000 years to unravel. Now that's what I call a fortress!

Want a full list of tips on how to create a strong password? Go to bit.ly/ bbb-password-tips.

Have you fallen for a scam or narrowly avoided one?

Proud to be Serving The Notary Society, BC Notaries, and Their Clients with • Wills & Estates Litigation • Real Estate Property Disputes

There is power in telling your story.

Report your personal experiences to BBB Scam Tracker at bbb.org/scamtracker, Canadian Anti-Fraud Centre, or your local police.

The Better Business Bureau has empowered people to find businesses, brands, and charities they can trust for over 110 years. In 2021, people turned to BBB more than 200 million times for BBB Business Profiles on 6.3 million businesses and Charity Reports on 25,000 charities—free at BBB.org.

Local independent BBBs can be found across the US, Canada, and Mexico, including the BBB Serving Mainland British Columbia and the Yukon territory, founded in 1939.

A A R O N G U I L L E N is the Media and Communications Specialist with BBB.

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QUANG T. DUONG

GORDON J. KEHLER

IAN M. KNAPP

1600 – 1095 West Pender Street Vancouver, BC V6E 2M6 Phone: (604) 689-3281 Fax: (604) 685-6494 www.macfuj.com THE SCRIVENER | WINTER 2023

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Creative Adaptable Analytical Today’s successful real estate professional is committed to lifelong learning.

UBC’s Continuing Professional Development Courses meet your needs.

• Convenient online course format • Broad range of valuation and real estate business topics • Guaranteed Appraisal Institute of Canada’s Continuing Professional Development credits Business Development Series: Eight courses designed to provide practitioners with the entrepreneurial and practical skills to establish and successfully operate a real estate business.  Entrepreneurship and Small Business Development  Business Strategy: Managing a Profitable Real Estate Business  Succession Planning for Real Estate Professionals  Organizing and Financing a Real Estate Business  Accounting and Taxation Considerations for a Real Estate Business  Marketing and Technology Considerations for a Real Estate Business  Human Resources Management Considerations in Real Estate  Law and Ethical Considerations in Real Estate Business

To find out more, visit:

realestate.ubc.ca/CPD tel: 604.822.2227 / 1.877.775.7733 email: cpd@realestate.sauder.ubc.ca

FRAUD

The Growing Scam Targeting Canadian Seniors

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grandparent scams in this country; the actual number is likely much higher as embarrassment prevents many seniors from reporting the crime.

Sadly, that one ploy is just the tip of the iceberg. Fraud is the number one crime inflicted on Canadian seniors each year. Tens of thousands fall victim to fake phone calls, phishing emails, and door-to-door swindles each year.

The best way to avoid falling victim to scammers and fraudsters is to learn about their tactics before they find you.

1. Do your research.

Keep up to date on emerging scams and never let your guard down.

2. Get ready to be rude.

Refuse to engage and don’t let yourself get dragged into the conversation or be tricked to click.

iStock.com/Prostock-Studio

Î “Hello Grandma? It’s Bobby. I’m in big trouble and I need your help!

I’ve been in accident. It wasn’t my fault, but I’ve been arrested and I need money to pay a lawyer. Can you please talk to him? And please don’t tell Mom and Dad!”.

Grandparents often have a hard time saying no to their grandchildren.

Scammers know that, too. That’s why the so-called “Grandparent” scam has become one of the fastest-growing ways for fraudsters to target seniors across North America.

For the victim it starts with a phone call, often late at night. For the scammers, however, the research on their intended victim likely started quite some time ago.

In this Internet age, scammers can mine social media to figure out the names and details of family members for their intended victims. They may even find phone numbers, and use technology to “spoof” caller ID so the call appears to be coming from a trusted source.

A recent article in Washington Post reported that some scammers are even capturing voice recordings from videos shared on social media, and using artificial intelligence to recreate the voice in live conversations during their con.

Against such devious crooks and impressive technology, it’s no wonder a growing number of Canadian seniors are taken in. Last year alone, nearly $10 million was reported lost to

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3. Don’t get pressured.

Never give out information, not even your name, and don’t click on that link to find out more. As the old saying goes, curiosity killed the cat.

4. Don’t fall for their tricks.

Unless you initiate the interaction, banks, government, and public health agencies will never ask for personal information.

5. Beware of upfront fees and time-sensitive offers. If it sounds too good to be true, it probably is. It’s illegal for a company to ask you to pay a fee upfront before they’ll give you a loan. There are no prize fees or taxes in Canada so if you won it, it’s free.

6. Secure your online presence.

If you need help, get it from a reputable source or expert . . . or maybe you have a tech-savvy relative.

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FRAUD

Here are some useful resources to help you avoid scams and fraud and help you restore your security if you suspect you’ve been the victim of a cyber security data breach, scam, or fraud.

Canadian Anti Fraud Centre 1-888-495-8501 https://antifraudcentre-centreantifraude.ca/ y Find info on recent scams and fraud and how to protect yourself. y Report fraud, scams, and cybercrime. y Find info on what to do if you’re a victim.

Seniors First BC 1-866-437-1940 https://seniorsfirstbc.ca/ y Find resources and information including the BC Seniors’ Guide, the RCMP Seniors’ Guidebook to Safety and Security, Benefits for Older Adults, Planning for your Future, Recognizing Elder Abuse, and much more.

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SAIL

GLUU Society

Seniors Abuse and Information Line

https://gluusociety.org/

604 437-1940 or 1-866-437-1940 Weekdays 8 to 8 Weekends 10 am to 5:30 pm, excluding statutory holidays.

Language interpretation is available.

Just call if you feel an older adult is in an abusive situation of any kind.

GLUU is a nonprofit organization helping older adults learn to use technology and stay safe in the digital world.

Consumer Protection BC 1-888-564-9963 https://www.consumerprotectionbc.ca/ y Information, resources, and consumer tips What do to if a salesperson is at your door, online shopping tips, and much more. y Look up a business.

Check the licence, view any recent enforcement actions, look through closed cases. y Report suspicious salespeople.

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y Membership is free and gives you free access to courses and online learning resources. y Step-by-step tutorials, courses, and guidebooks for specific techy devices, and essential information for older adults of all skill levels And if you receive an unexpected late-night phone call from a family member in need, never be afraid to ask a question that only your loved one can answer. Better still, hang up, and call them back on a number you know.

Anyone who loves you will understand your need to stay safe in these challenging times.

TOM ARNOLD is Executive Director of the Greater Victoria Eldercare Foundation. www.gvef.org

FRAUD

Anatomy of the Grandparent Scam It’s back. It’s dangerous. It’s heart-breaking.

It is called the Grandparent Scam.

Î We have been educating and warning folks about this cruel scam for decades now. Although we related the details of the scam in our articles and presentations, my personal experience with the scam was only through thirdparty reports. Until it wasn’t.

Before hanging up, I did ask him his name; a perturbed voice said, “Come on, Grandma, you know who this is—how could you ask me that—it’s me—your grandson.” I told him I was reporting this call to the police and hung up.

Our phone rang. My husband answered the call, listened for a few moments, and looked concerned. He handed the phone to me. The caller sounded like a young male. He was frantic and talking very quickly.

I couldn’t get a word in edgewise.

He kept calling me “Grandma” and was racing with clipped minute details about riding in a borrowed car with a friend. They didn’t know the car was stolen; they were pulled over by the police and are now in jail. They desperately and immediately needed money to be released. “Please, please help, Grandma, I really need your help and I am so embarrassed—don’t tell anyone.”

Ah, I am thinking, so here it is. I am finally experiencing first-hand “the Grandparent Scam.” Part of me wanted to play it out as far as I could, in order to hear him confirm the amount of money needed and how the transfer of funds would take place.

Although I was tempted to engage further, I remember being warned against playing along with scammers out of curiosity and so I prepared to shut down the conversation.

R H O N DA L AT R E I LLE

protective instincts we hold for our loved ones. The urgency and fear seeded in the narrative are meant to overpower the logic that would otherwise flag the situation as suspicious.

A Faux Familiarity The repeated use of “Grandma” is a calculated move to forge a false bond to deepen the emotional entanglement in the fabricated crisis at hand.

Scripted to Perfection The scammers have their script down to a fine art. Every frantic utterance, every supposed hiccup in the story, is rehearsed to perfection, aiming to build a facade of authenticity and urgency.

A Whirlwind of Disorientation The rapid-fire delivery and barrage of details are meant to disorient, to drive you into a state where clear thinking takes a back seat to the emotional turbulence they've provoked.

Veil of Secrecy

photo: istock/studiolaut

I was struck by the precision of the performance, scripting, and acting.

They were good. The Grandparent Scam is not a random act, but a finely tuned encounter designed to tug at the heartstrings and move you to their intended outcome of separating you from your money.

Let's dissect the elements that contribute to the scam's malicious genius.

Emotional Hijack The scam is a masterclass in emotional manipulation, exploiting the

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Urging secrecy is a maneuver to isolate the individual from the voice of reason that friends or family could provide, keeping the recipient trapped in the scammer’s deceit.

Guilt, The Invisible Chain The feigned indignation when asked for a name is a guilt-trip to make the grandparents feel wrong and not loving enough—a psychological trap meant to coerce cooperation.

Vague Vocal Resemblance Though the voice didn't match perfectly, scammers often bank on the emotional turmoil and the vague familiarity to gloss over such discrepancies.

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FRAUD

Barbara is 91 now.

She still dreams of dancing.

A gift in your Will to Eldercare Foundation can provide vital therapy programs to seniors in care who still dream of dancing, moving, creating, and living with dignity.

The temptation to probe further is natural, yet dangerous.

Each interaction is a chance for the scammers to glean more information, to refine their deceitful art for the next target.

Please Give.

Immediate Financial Plea

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Curiosity, A Risky Enticement The temptation to probe further is natural, yet dangerous. Each interaction is a chance for the scammers to glean more information, to refine their deceitful art for the next target.

For you to think you would never fall prey to those types of scams denies the sophistication of the crafting and the execution of the calls. There is a science to the composition of every word, pause, timing, and emotion.

Understanding the layers of the scam is the first step toward arming yourself and your community against such predatory antics.

The scam is a reflection of the highly developed skill that scammers employ to exploit the caring bonds that knit our families and communities together.

Watch for Our Spring 2024 Issue!

www.bcnotaryassociation.ca 48

The plea for immediate financial aid is a pressure tactic meant to push the individual into acting hastily, forestalling any deeper analysis of the situation at hand.

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From the Age-Friendly Business “Maturity Matters Newsletter,” Edition 11, Volume 23 R H O N D A L AT R E I L L E , MBA, CPCA, is the Founder and CEO of Age-Friendly Business®. https://agefriendlybusinessacademy.com/

2024

Topic: Underused Housing Tax Presenters: Canada Revenue Agency When: Friday, January 19 Time: 9 am – 10 am Where: ZOOM CE Credit: 1 Credit COST: $30 member + 5% GST $75 non-member + 5% GST

CONTINUING EDUCATION

Description: This session will include information on what is the UHT, information on who is obligated to file and types of residential properties affected by the UHT, descriptions on the exemptions available from paying the UHT, as well as how to file the UHT-2900 return and pay any UHT owing. Time will be allotted for Q&A.

BC NA

Presenters: Matthew Hohnsbehn

Sunny Leung

James Baker

Acting Senior Programs Officer Underused Housing Tax and Appraisals Section Non-Resident Compliance Division Canada Revenue Agency

Liaison Officer Coastal & Central Tax Services Office, Western Region Canada Revenue Agency

Liaison Officer Coastal & Central Tax Service Office Canada Revenue Agency

Sunny Leung is an Income Tax Liaison Officer in the audit department of the Coastal & Central Tax Service Office. He has over 15 years of experience in various Auditor roles with the Canada Revenue Agency.

James Baker is an Income Tax Liaison Officer in the audit department of the Coastal & Central Tax Service Office. He has over 16 years of experience in various Audit positions with the Canada Revenue Agency.

Matthew Hohnsbehn has over 9 years of experience with the Canada Revenue Agency. He has worked as a Collections Officer, Auditor, and Liaison Officer. Currently, Matthew is a Senior Programs Officer assisting with outreach and education around the UHT.

Please visit the BCNA Website to register: www.bcnotaryassociation.ca TABLE OF CONTENTS

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2024

CAREER FAIR & CONTINUING EDUCATION

The Annual Student Notary Career Fair connects Student Notaries looking for employment, and current Notaries looking for staff or looking to sell their practices. It is also an excellent opportunity to meet the current cohorts of Notary students and introduce them to a portion of our current membership of Practising Notaries.

CONTINUING EDUCATION CREDIT The CE session is for BCNA Members participating in the Career Fair.

Topic: Networking Essentials: How to Plan a Strategy That Works For You Presenter: Amanda Wilson When: Saturday, February 24 Time: 1 hour Where: ZOOM CE Credit: 1 Credit Description: This session reviews the building blocks of an effective marketing strategy that considers your unique goals, personality, and budget. We’ll go over how to position yourself in a crowded market, the networking skills to cultivate in your community, and the steps you can take to make a name for yourself and build a successful career or business.

Presenter:

As one of the founders of Spark Strategic Group, Amanda’s passion is working with entrepreneurs and business owners to implement marketing and communications campaigns that increase awareness and revenue. She’s a big picture thinker who supports her clients in refining and maintaining their vision and goals. Currently based on Vancouver Island, she’s worked for theatre companies, arts organizations, and in television and radio in Ontario and B.C. Her varied career encompasses journalism, public relations, marketing, video production, advertising, and sponsorship sales and community engagement.

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2024

CONTINUING EDUCATION

SAVE THE DATE

CONFERENCE

SHERATON WALL CENTRE VANCOUVER

BCNA ANNUAL CONTINUING EDUCATION CONFERENCE

APRIL 5 - 7, 2024 REGISTRATION OPENS SOON WE LOOK FORWARD TO WELCOMING YOU TO THE BCNA 2024 CONTINUING EDUCATION PROGRAM

PRELIMINARY PROGRAM

PAL Updates

Estate Planning & Wills Collaboration

Private Lender Mortgages

Risk Management

Land Use Planning and Strata Titling

Unified Legislation and Regulation

PLEASE NOTE, MORE DETAIL TO FOLLOW. EDUCATIONAL PROGRAM IS SUBJECT TO CHANGE. TABLE OF CONTENTS

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WILLS & ESTATES

THE MIX

Varying or Terminating a Trust

T R E VO R T O D D

What Is a Trust? Î A trust is the relationship that arises whenever a person called the trustee is compelled in equity to hold property—whether real or personal and whether by legal or equitable title—for the benefit of some person(s) of whom he may be one, and who are termed beneficiaries, or for some object permitted by law, in such a way that the real benefit of the property accrues not to the trustee but to the beneficiaries or other objects of the trust.

A trust is not a legal entity but instead is a “relationship” between the settlor (creator) of the trust and the beneficiaries.

For a trust to be valid, there must be evidence of the three certainties. y Certainty of the clear intention to create a trust y Certainty of the subject matter of the trust y Certainty of the object of the trust Why Have a Trust?

There are several reasons. In their estate planning, many people give gifts through trusts to specify terms for when and how funds and gifts can be distributed.

No probate is required as the terms of the trust remain confidential, rather than becoming public documents and incurring probate fees of approximately 1.4 per cent.

In estate litigation, it is very significant that the terms of the trust cannot be attacked by Wills Variation proceedings as can occur when assets are left to be distributed by a Will.

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In their estate planning, many people give gifts through trusts to specify terms for when and how funds and gifts can be distributed.

Why a Variance or Termination of a Trust?

Features of Some Common Trusts 1. The delay of the estate distribution at certain intervals or milestones in the beneficiaries’ life 2. Purpose trust accounts for specific purposes such as a provision for a pet 3. For disabled beneficiaries so they do not lose government funding as can occur if assets are given outright 4. Lifetime provision with a gift over to residual beneficiaries upon death In essence the terms and overall purpose of a trust can be almost anything the testator wishes so long as the three certainties are met and the terms do not violate public policy. It is questionable, for example, that a provision in a trust that the beneficiary’s interest in the trust will terminate upon remarriage would be upheld by the Court.

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Trusts often have lengthy terms and are expected to be in place for many years. The terms can become outdated or unreasonable.

The trustee is a fiduciary of the trust and cannot alter the terms of the trust without a Court Order or unless the trust document itself permits the trustee to vary same. The Courts through the Trust and Settlement Variation Act (TSVA) can in certain circumstances vary the terms of the trust or even terminate the trust to create a more appropriate and useful distribution.

Trust and Settlement Variation Act (TSVA) The Act specifies the conditions in which the Courts are able to vary a trust. Any interested party is able to come forward before the Courts to request a variation. The Courts have the discretion to either approve the request and vary the trust or to revoke the trust or enlarge the powers of the trustee.

Case Law: Trust Varied or Terminated 1. Molnar v. Molnar 2023 BCSC 1911

At common law, the beneficiaries of a trust may vary the terms of the trust if they all have full legal capacity, they unanimously consent to the variation, and they are the only persons entitled to the trust property.

A trust was created by the parents of the petitioner after he had sustained serious injuries in a motor vehicle accident from which he later recovered.

A further order was granted approving the termination of the trust on behalf of any person unborn or adopted who may have become entitled to an interest under the trust.

While there is no specific criteria for when the Courts will approve the request, variations most commonly occur in trusts that were not made to be reasonably utilized by the beneficiary.

The petitioner was 62 and would have been 74 when the trust was to be distributed to him in 2035. The petitioner’s oldest son was an adult and agreed to the variation.

The Courts are not to approve the request unless the proposed changes are beneficial for the beneficiary of the trust. The testator’s or settlor’s intention is no longer required. Smith v. Royal Trust 2003 BCSC 1606

Since the word “issue” was used in the trust, which would include all his lineal descendants, it was “possible” that any of the petitioner’s children yet unborn or adopted could receive a share of the remaining trust property.

a. Section 1 of the Act empowers the Court to consent to trust variations on behalf of persons incapable of consenting due to age or other incapacity.

At common law, the beneficiaries of a trust may vary the terms of the trust if they all have full legal capacity, they unanimously consent to the variation, and they are the only persons entitled to the trust property: Saunders v.

Vautier (1841), Cr. & Ph. 240, 41 E.R. 482 (Ch. D.). As the common law test requires unanimous consent of fully capable beneficiaries, variation under the common law is not permitted where the beneficiaries include unborn persons, minors, or adults lacking capacity.

c.

Section 3 of the Act states that the Public Guardian and Trustee (PGT) must be given notice of any application under the Act if the person under section 1 is unborn.

Notary Public

The Court granted an early windup and termination of the trust with the funds of approximately $100,000 to be paid forthwith to the applicant.

As the trust terms included potential beneficiaries as yet unborn or adopted by the petitioner or his adult son, the Court's approval of the variation is required pursuant to the TSVA.

b. Section 2 of the Act requires that the Court not exercise its discretion under section 1 unless the arrangement appears to be “for the benefit of” those persons.

Greg Litwin,

The TSVA extends the common law rule in Saunders by allowing the Court to consent to an arrangement on behalf of deferred, contingent, or

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“People’s Choice” for the past 3 years

Experienced: 35+ Years A Trusted Tradition

Your Roving Notary TESTIMONIAL “All week, my clients and staff have been saying how much they enjoyed working with you. I’m not surprised but I feel so blessed that we can go away for a month and everything continues on smoothly. I know we are very fortunate.”

From Notaries Trish Fedewich and Norm Witt

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WILLS & ESTATES

potential beneficiaries who are unidentified, unborn, or not of full age and legal capacity: Smith v. Royal Trust Corporation, 2003 BCSC 1606 at para 5.

2. Baschau v. Rogers Communications Inc. 2003 BCSC 683 Members of the company pension plan all voted to terminate the plan but for 25 who failed to get the consent of their designated beneficiaries. Rogers argued that the lack of consents precluded termination of the plan under the TSVA. The Court granted the order terminating the trust stating that the contingent beneficiaries were so remote and uncertain that it was unreasonable to require the members to contact the beneficiaries to obtain consent. The interests of the designated beneficiaries fell within the meaning the Act such that there was jurisdiction to consent on their behalf.

3. Smith v. Smith Estate 2003 BCSC 1606 Smith is the leading case in BC on variation of trusts.

The petitioner succeeded in varying the trust created in the Will of his deceased father. The beneficiaries of the trust included the petitioner, his daughter and her children, his late daughter’s children, and various contingent beneficiaries that included persons unborn and infants incapable of assenting: Smith at para 2.

The Court considered the terms of the trust and the ways in which a contingent beneficiary could become entitled under the trust, along with the circumstances of the individuals and found that there was an “extremely remote” possibility of any of the contingent beneficiaries receiving a share of the trust: Smith at paras 18–25.

The Court also considered the circumstances of the case, including that the adult beneficiaries consented to the variation, it was a close and loving family, and that the grandchildren

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would be able to be financially provided for even without the trust, and so granted the petition.

The test for Court approval did not require a complete elimination of risk.

A prudent adult motivated by intelligent self-interest, after careful consideration of the potential benefits and risks, would accept the proposed variation.

The Court reiterated the principle that the Court must not approve an arrangement unless it appears to be for the benefit of persons who may have an interest in the trust. That often involves the yet-unborn.

support. The plaintiff had an extensive history of engaging in litigious matters arising from her divorce related to her father’s Will and the administration of her mother’s estate.

The application was dismissed on the basis she failed to satisfy the Court that she had at least a prima facie case in the actions for which she sought a retainer. The case for the father’s mental incapacity appeared almost insurmountable and anything that encouraged more litigation in the family was to be discouraged.

The Court reiterated the principle that the Court must not approve an arrangement unless it appears to be for the benefit of persons who may have an interest in the trust. That often involves the yet-unborn.

Conclusion In 50 years of estate litigation practice, I have done only one TVSA application.

There are surprisingly few reported cases on variation of trusts and while most of them apparently do vary the trust, there is no certainly the Courts will do so.

That leads me to believe it is an underutilized remedy and not very well understood by the legal profession.

Case Law: Variation Refused Byrn v. Mackin 2000 BCSC 1501 Byrn is an example of the BC case law where the Court refused a variation of a trust.

The applicant applied for an order that $75,000 be paid to her from money held in trust for her benefit, in order to retain legal representation for three proposed Court actions against her siblings. The trust was created by her deceased father and provided for payment to her of interest of $1,400 per month. The basis of the trust was to ensure the plaintiff had means of

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In my particular application, the PGT opposed the variation on behalf of unborn children of the trust. My client was a 55-year-old woman who testified in affidavits that she would never have another child or adopt a child. The trust was varied and the chambers judge commented she also was 55 and understood that the applicant would not have a further child or likely adopt a child.

The 2023 decision of Molnar is seemingly indicative of the trend of the Court to vary or even terminate a trust when the criteria of the TVSA is met.

TREVOR TODD restricts his practice to estate litigation. He has practised law in Vancouver for 49 years.

STREAMLINING THE SUBMISSION PROCESS

Building Resilient and Customer-Friendly Land Title Systems Î The Land Title and Survey Authority of BC (LTSA) receives hundreds of thousands of land title applications each year, ranging from simple applications to complex title registrations.

BC Notaries and other legal professionals do a substantial amount of preparation to submit applications to LTSA. We want to make your life easier while maintaining the integrity and security of the land title register.

To that end, we have introduced behind-the-scenes changes to ensure land title applications are processed efficiently and accurately. In addition, we provide customers with the knowledge, tools, and workflows that make the submission process as seamless as possible.

Over the past few years, concentrated efforts have been made to increase electronic filing, reduce defects, and advance automation gains. Those efforts were made to ensure our customers are able to file applications quickly and accurately.

Online Services for Public Applications More than 95 per cent of land title applications are submitted electronically, primarily by legal professionals.

There was work to be done, however, to enable our “general public” customer to file online submissions for four of the most common application types.

Applications, previously available to the public as a PDF, that can now be completed using web-based forms include: y Change of Mailing Address on Title, y Change of Name on Title, and y Claim of Builders Lien.

As with web-filing forms used by the legal profession, online forms minimize data entry errors, and data accuracy can be checked prior to submission. As a result, online submissions are more accurate and can be processed faster.

In early 2024, LTSA will introduce an online form for property owners to complete for Transmission to

C A M I LLE R E I D

Surviving Joint Tenant. Particularly complex, the application also includes Property Transfer Tax and Land Owner Transparency Registry forms.

Reduced Defect Rates For legal professionals, receiving a defect notice can take a lot of time and energy to manage and resolve. LTSA recognizes receiving a defect notice can be a frustrating experience. Our goal is to ensure our customers have access to resources to help them submit accurate applications for timely registration.

Our teams recently completed a significant review of defect tracking data and defect notices, with the aim of improving the clarity and consistency of information in defect notices. That work helped ensure defect notices sent to customers more clearly outline the reason for the defect, helping customers address the issue in a timely manner.

Each defect notice clearly identifies the three Rs: y Reason for the defect, y Requirement to resolve the issue, and y Reference to legislation or practice requirements.

Equipped with that knowledge, defect notices can be dealt with efficiently. As always, customer support remains available for any follow-up questions.

Through our data analysis, we also uncovered that between 20 to 25 per cent of all defect notices are not actioned or resolved by the applicant within the 30 days required by section 308 of the Land Title Act. We appeal to customers; Help us maintain the integrity and accuracy of the land title register by addressing defects promptly.

A significant amount of attention was also directed to analysing the most common defects and ways to reduce them through the delivery of educational webinars and introduction of various system enhancements.

We responded to customer feedback that indicated a desire to know what examiners look for when reviewing packages as well as the top defect reasons and how to avoid

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STREAMLINING THE SUBMISSION PROCESS

them. That precipitated the development of a series of policy and practice webinars that were well attended and highly rated. Resource materials and recordings are posted online at ltsa.ca for ease of reference.

System enhancements such as increased validation warnings and errors on web-based filing forms establish helpful guardrails that highlight potential issues throughout the submission process, rather than at the end. Increased character-limit and drop-down menu options avoid unnecessary attachments that route the submission to manual examination. The ability to copy-and-paste data or restore accidentally deleted documents is a welcome addition to system functionality.

Supporting customers to submit registrable packages is vital. Thanks to the support and effort of our customers, there are fewer defects to correct and re-submit.

Advancing Automation Automation refers to the hundreds of decision-making rules used for automated examination. The rules determine if an application is registerable. For example, do the names match the names on title? Are there two signatures? Binary in nature, examination rules are consistently applied; either the application follows the rules or it doesn’t. Applications filled out correctly that pass all the rules are registered after the 48-hour hold period.

By providing drop-down options with standardized language and increasing character-length in certain fields, unnecessary attachments that lead to manual examination are avoided. By heeding and addressing error and warning messages, customers are made aware of potential issues before submission.

LTSA’s pursuit of operational excellence has resulted in a better customer experience. LTSA’s 2022 Customer Relationship Health Survey results indicated that 79 per cent of respondents rated their experience with LTSA as “excellent” or “very good.” By continuing to listen to customers, we ensure our product and service improvements closely align with customer needs.

By leveraging innovation and prioritizing customer feedback, LTSA builds resilient systems that contribute to a real property market that is trusted and secure. With advanced automation gains, fewer defects, and increased web-based filing submissions, customers are experiencing improved turnaround times, consistency in examination, and a deeper understanding of the vital part they play in contributing to a reliable land-related system that supports the economy in the public interest.

C AMILLE REID is Vice President, Operations, Land Title and Survey Authority of BC. ltsa.ca

LT SA AD

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INTERNATIONAL DOCUMENTS

Canada Joins the Apostille Convention

P E T E R Z A B LU D

A Milestone for All Canadians, Part 1 Î A Cure for a Costly Headache During the past year, Canadian Federal and Provincial Government Authorities authenticated some 200,000 documents as an essential step in having them “legalized” for use abroad. The documents concerned comprise a genre known worldwide as “public documents.” They include Notarial acts (in both authentic and private forms) and Notarial authentications of signatures.

The consular legalization of documents saw Canadians parting with upward of $60 million to pay for their involvement in an unwieldy, frustrating, time-consuming, and out-dated process. Most of that costly headache disappeared on January 11, 2024, once the Apostille Convention entered into force for Canada.

Introducing the Apostille Convention

Flags of countries party to the Apostille Convention

photo: istock/sitox

the 1993 Adoption Convention, and the 2007 Child Support Convention. (See HCCH website <hcch.net> for details of all Conventions.)

y assist Canadians in conducting their cross-border personal and business affairs, as it has done since its inception for millions of people around the world.

The Apostille Convention was delivered of the HCCH at its Ninth Session on October 26, 1960, and was first signed on October 5, 1961. It entered into force January 24, 1965.

The Hague Convention on Private International Law – Conference de la Haye de droit international privé (“the HCCH”) is an intergovernmental organization founded in 1893. Since then, its members have concluded 48 international Conventions including the Convention of 5 October 1961, Abolishing the Requirements of Legalisation for Foreign Public Documents (“the Apostille Convention”).

The Apostille Convention is one of the most successful and highly regarded of the HCCH Conventions. There are now 126 Contracting Parties to the Convention, including virtually all of Canada’s major trading partners and the principal countries of the Canadian diaspora.

Canada has been an active HCCH member since October 7, 1968, and is now a Contracting Party to six HCCH Conventions, namely the 1961 Apostille Convention, the 1965 Service Convention, the 1980 Child Abduction Convention, the 1985 Trusts Conventions,

y provide a simple, workable, and acceptable solution to the burdensome administrative problems of consular legalization of public documents that have until now bedevilled Canadian international trade and commerce; and

From Canada’s perspective, the Apostille Convention will

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The Apostille An Apostille (pronounced “apostee”) was originally an early 16th century French word that meant a short recommendation or recommendatory note written by an influential person on the margin of a petition or at the foot of a letter. (JCH Taver, The Royal Phraseological English-French, French English Dictionary, 3rd ed. London 1858). The word was adopted by the HCCH as the name of the Certificate to be affixed to public documents in lieu of consular legalization. The form of the Apostille is set out in an annex to the Convention.

“Public Documents” for the Purposes of the Apostille Convention The following documents are deemed to be “public documents” as set out in the English language version of the Convention, namely, THE SCRIVENER | WINTER 2023

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INTERNATIONAL DOCUMENTS

a. documents emanating from an authority or an official connected with the Courts or tribunals of the state, including those emanating from a public prosecutor, a clerk of Court, or a process server (huissier de justice); b. administrative documents; c. Notarial acts; and d. official certificates that are placed on documents signed by persons in their private capacity, such as official certificates recording the registration of a document or the fact that it was in existence on a certain date and official and Notarial authentications of signatures.

Form and Effect of an Apostille The form of the Apostille is set out in an annex to the Convention. In addition to a compulsory (French language) heading, the Apostille includes 10 numbered information items to be completed by the issuing Competent Authority that, among other things, provide salient identifying particulars of the public document to which the Apostille relates.

Apostilles are affixed to public documents either directly or by means of an allonge. They are signed, dated, and stamped by the issuing Competent Authority. As required by the Convention, a unique number is allocated to each Apostille. Particulars of all Apostilles issued by each Competent Authority are recorded and retained by the issuing Competent Authority in a publicly accessible register.

As is the case with “legalization” of a public document, an Apostille does not in any way certify the truth or accuracy of information contained in a document to which it relates, nor does it enhance the value of a document or its content. In the case of a Notarial act, the Apostille does not verify or add any legal significance to any underlying document to which the Notarial act is appended or upon which it is endorsed.

Competent Authorities The scheme of the Convention involves the designation of one or more “Competent Authorities” by each Contracting Party. Competent

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Authorities are authorized to affix Apostilles to public documents falling within their designated areas of responsibility.

Each Competent Authority sets its own fees and procedures that differ significantly. Members of the public are not entitled to “shop around” for the cheapest Apostilles or the fastest processing of documents.

Authenticating Public Documents for Consular Legalization

The UK model not only eases back-office administration procedures for staff and minimizes the possibility of bureaucratic error, it also places greater responsibility on the lodging parties and their advisors, including Notaries, to determine if consular legalization is required in any particular case.

Competent Authorities will also continue to authenticate Canadian public documents for subsequent legalization by consular officers of countries that are not yet party to the Apostille Convention.

When doing so, instead of adopting an Australian style system where the Competent Authority affixes a specific (already existing) authentication certificate to a document to be sent for consular legalization, Canada’s Competent Authorities will all follow the United Kingdom model; they will affix Apostilles to all public documents going abroad, even if the destination jurisdictions are not party to the Apostille Convention.

The UK model not only eases backoffice administration procedures for staff and minimizes the possibility of bureaucratic error, it also places greater responsibility on the lodging parties and their advisors, including Notaries, to determine if consular legalization is required in any particular case.

The Electronic Apostille Program

The BC Competent Authority 1. The Government of Canada has designated Ministry Attorney General to be the Competent Authority in British Columbia with effect from January 11, 2024.

2. The Government of Canada has given notice to the HCCH that it may at any time change the designated Authorities for Canada, pursuant to the provisions of the Convention

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In April 2006, together with the National Notary Association of the USA, the HCCH launched its “electronic Apostille Pilot Program,” which under the HCCH aegis has since morphed into the “electronic Apostille Program” (the e-APP).

Cont ract ing par t ies are not obliged to implement the e-APP. For the time being, Canada will not be introducing the e-APP as part of its service regime.

PR OFESS OR PETER ZABLUD, AM, RFD, is an Australian Lawyer, and Notary.

TAXES

Should You Incorporate? Part 1

JEREMY ANDERSEN

recent changes to the Income Tax Act, Integration is still imperfect and various factors can result in over- or underintegration—including the applicable marginal tax bracket.

That is best illustrated by examples.

1. Let’s say you operate a business as a sole proprietor and your net income from operations is $250,000. At that income level, your income would be taxed at the highest combined (Federal and BC) marginal personal income tax rate, currently 53.5%. All else being equal, your tax liability would be $133,750, leaving you with net after-tax income of $116,250. photo: istock/dizain

Î An oft-asked question from businessowners of all stripes is whether or not to incorporate. y Among the reasons cited is an expectation of tax savings due to lower corporate tax rates (currently 11% combined rate for Active Business Income earned by Canadian Controlled Private Corporations in British Columbia that are eligible for the Small Business Deduction).

While there are some limited instances where incorporating a business may yield slight tax savings, our tax system is structured to prevent such advantages—and changes in recent years have all but eliminated those advantages.

That is because our system of income taxation in Canada is based on a concept known as Integration.

The Basics Fundamentally, Integration aims to make individual taxpayers indifferent as to whether they earn income as an employee (either of an arms-length corporation or one in which they are the controlling shareholder) or by distributing income by way of dividends from a company over which they are the controlling shareholder.

In either scenario the overall tax burden from the combined corporate and individual taxes should be the same. I say “should” because despite

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2. Let’s assume instead that you incorporate that same business that pays you a salary equal to its net income of $250,000. Having paid out all its net income, the company would have no taxable income and thus no liability for tax. You, as the employee, would be taxed on $250,000 of personal income, resulting in the same outcome as the example above.

3. Now let’s assume that rather than paying yourself a salary from the company, you pay yourself in dividends.

All else being equal, the company’s net income of $250,000 would remain in retained earnings. That income would be taxed at the corporate income tax rate of 11%, resulting in a tax liability of $27,500. After paying that tax bill, the company would have $222,500 available THE SCRIVENER | WINTER 2023

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TAXES

Services a BC Notary Can Provide A. PROPERTY MATTERS 1. Residential and Commercial Real Estate Transfers 2. Mortgage Refinancing Documentation 3. Manufactured Home Transfers 4. Easements, Covenants, and Rights of Way 5. Builder’s Liens 6. Subdivisions and Statutory Building Schemes 7. Zoning Applications

B. PERSONAL PLANNING 1. Wills Preparation 2. Powers of Attorney 3. Representation Agreements 4. Advance Directives 5. Wills Notice Searches 6. Estate Planning

The answer is, although Integration may eliminate any immediate tax advantages, incorporating still provides some tax planning opportunities.

to pay dividends to you ($250,000 ‒ $27,500). After accounting for the dividend gross-up and related dividend tax credit, the effective income tax rate on that $222,500 would be 48.89%, thereby resulting in your receiving net after-tax income of $113,720.

Those examples are summarized in the table below.

C. NOTARIZATION /DOCUMENTS 1. Affidavits for All Documents required at a Public Registry within BC 2. Certified True Copies of Documents 3. Execution/Authentications of International Documents 4. Notarizations/Attestations of Signatures 5. Insurance Loss Declarations 6. Personal Property Security Agreements 7. Statutory Declarations 8. Authorization of Minor-Child Travel 9. Letters of Invitation for Foreign Travel 10. Passport Application Documentation

E. SOME BC NOTARIES PROVIDE THESE SERVICES.

For the BC Notary office nearest you, please call 1-604-676-8570 or visit www.bcnotaryassociation.ca.

Note: Not all Notaries provide all services listed. Please check with your Notary before making an appointment for services.

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Tax Planning Opportunities One such opportunity is through timing distributions of income. If you don’t require all the income earned by your company, surplus income can be left in the corporation until it’s needed.

That income will initially be taxed only at the lower corporate tax rate for Active Business Income.

Of course, that income will ultimately be taxed in the hands of the individual to whom it’s distributed at their marginal tax rate. The discretion as to the timing of when that surplus income is distributed, however, lies in the hands of the businessowner who can spread that distribution over time rather than all at once, resulting in it being taxed at a lower marginal tax rate, thereby reducing the overall tax burden.

1. Business Purchase/Sale 2. Commercial Leases and Assignment of Leases 3. Contracts and Agreements

There are Notaries to serve you throughout British Columbia

The answer is, although Integration may eliminate any immediate tax advantages, incorporating still provides some tax planning opportunities.

y In our example above, that strategy results in a 42.5% tax deferral.

D. BUSINESS

1. Marine Bills of Sale and Mortgages 2. Marine Protests 3. Marriage Licences 4. Mediation 5. Real Estate Disclosure Statements

maintaining a corporation. So why bother to incorporate at all?

y The $2,530 difference in after-tax income between the two scenarios is known as “under-integration.”

That is, the combined corporate and personal taxes are greater than the taxes that would have been paid if you had earned income directly.

In other words, the cost in terms of taxes of incorporating under the Canadian taxation system for income-earners at the highest marginal tax rate is approximately 1%. That, of course, is in addition to the direct costs of creating and

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Note: I have referred to the lower corporate tax rates applying to active business income. While our income tax system is designed to favour small businesses, it is also designed to dissuade taxpayers from using corporate structures to earn investment income. Active Business Income refers to income earned by a corporation through the provision of its primary business activity.

That means if you provide professional services through a corporation,

The Source of Income Matters

It should be noted that dividends and salary are not mutually exclusive; sometimes a blend of the two is an advantageous strategy. that income would be taxed as Active Business Income. If you invest the corporation’s surplus cash, however, the income derived from those investment activities would not receive the same favourable tax treatment.

Another tax-planning opportunity is through an income-splitting strategy known as dividend “sprinkling.” That strategy is often employed by spouses who are shareholders in a corporation that is operated by either one or both spouses. y Rather than distributing 100% of the surplus to just one spouse to be taxed at a higher rate, the dividends can be split between the two shareholding spouses, resulting in that same amount being taxed in the hands of two individuals at lower marginal tax rates. y That strategy can be further enhanced by issuing different classes of shares to each spouse, thereby allowing the corporation to pay 100% of the dividends to one spouse or to split them between spouses, depending on what is more advantageous, given the circumstances at the time.

A strong word of caution when employing such a strategy—the Tax On Split Income (TOSI) rules were enhanced in 2019, which at once expanded the applicability of the TOSI rules while also making them more complex. The implications of being offside with TOSI are severe.

Therefore, it is wise to consult with a tax advisor who is familiar with your particular circumstances before contemplating such a strategy.

While Integration is intended to make individuals indifferent as to the source of their income, in terms of liability for tax, there are other factors to consider. For instance, dividends are not considered earned income and therefore do not apply to the incometest used for certain tax incentives. y For example, RRSP contribution room is based on earned income, meaning employment income creates RRSP contribution room . . . dividends do not. Likewise, employment income is subject to CPP withholdings charged to both employers and employees, currently at a rate of 5.95% each. Those who are self-employed are responsible for both employer and employee portions, for a total of 11.9%.

It should be noted that dividends and salary are not mutually exclusive; sometimes a blend of the two is an advantageous strategy. y For example, those who want the forced savings afforded by the CPP program may want to pay a salary to the CPP maximum applicable threshold. Or perhaps you would like to generate earned income to reduce the threshold for claiming the medical-expenses credit. Perhaps still you would like to declare a bonus to reduce your company’s taxable income to a target level.

A Final Word Those are generalized examples containing many simplifying assumptions that may not apply in every situation. Moreover, income tax rules are subject to ongoing changes; the assumptions used in the examples may not hold in the future. Readers are strongly encouraged to consult with a tax advisor before attempting to employ any of the strategies discussed in this article.

JEREMY ANDERSEN is a Courtenay Notary Public and CPA, CA, with 20 years’ experience working in the public sector, private industry, and public practice.

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Spring Advertising Space Deadline Mar. 15, 2024 scrivener@bcnotaryassociation.ca www.bcnotaryassociation.ca THE SCRIVENER | WINTER 2023

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PEOPLE NOREEN’S PASSING

KATE’S DUNDARAVE CHRISTMAS TREE

My dad El and mom Noreen at the 2016 Notary Conference in Kelowna.

They celebrated their 60th wedding anniversary this year.

My mom Noreen Fedewich passed in November. She loved being a Notary’s wife. My parents attended every BC Notary Conference for about 30 years. They enjoyed international UINL conferences, too. My husband Notary Norman Witt was her loving son-in-law.

- Notary Trish Fedewich

This festive tree sat on Dundarave Beach in West Vancouver during the 2023 Christmas Season where my Notary office has sponsored a tree for the past 15 years. The West Vancouver Fire Department sets it up Kate M an Nota ry Puvell bl ic for us and we decorate it.

An initial fee covers the tree and the electrical hookup/hydro cost for the 6 weeks that all the sponsored trees are on display. Sponsors are asked to make a minimum $250 donation to our North Shore Lookout Housing & Health Society, run by the North Shore Shelter that provides many services for homeless people in our community. Daily, thousands of seawall “walkers” enjoyed the bright colours of the Festival of Lights at Dundarave Beach/Pier.

- BC Notary Kate Manvell and Staff

The Notary Foundation of British Columbia works with interest generated

by BC Notaries’ Trust Accounts and received from our financial industry and other partners, to promote education for BC Notaries and the public, foster legal research, support law libraries, and help fund legal aid in BC. Talk to us if you’re interested in having an impact on those important facets of BC’s communities.

Funding and strategic decisions and oversight are provided by a Board of Governors made up of 8 Directors of The Society of Notaries Public, 1 appointee from the Office of the Attorney General of BC, and 2 Governors at Large appointed by the BC Government.

Applications for funding of law-related education programs, research, and projects may be made and will be considered throughout the year.

For more information, visit our website at www.notaryfoundation.ca.

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