In the real estate industry, people are so busy doing business that they often fail to take reasonable measures to manage and protect their businesses. I have met dozens of agents who do their own accounting, for example, never realizing that an accountant can save them thousands or even tens of thousands of dollars a year in taxes alone.
Real estate professionals are also careless when it comes to protecting their business from fraud, especially professionals who run their own agent teams. As long as the team is achieving its goals and the money is rolling in, the team leader assumes that the team is operating like a well-oiled machine. However, that well-oiled machine may be more like a well-greased machine -- from well-greased palms accepting kickbacks and fees for conspiring with con artists or simply looking the other way.
I have personally witnessed real estate brokers who were thriving one day completely crumble overnight because one or more agents or employees were involved in fraudulent real estate transactions. It's not a pretty sight -- FBI agents wandering through offices looking for evidence, grand jury subpoenas requesting agents and other staff members to testify, state regulators setting up camp in your office, newspaper headlines calling your reputation into question, and your best clients heading over to the competition.
To prevent this ugly scenario from happening to you, make sure your business has fraud safeguards in place:
Build an atmosphere of integrity. Businesses that bend the rules in their daily operations are more prone to becoming fraud centers. With no black-and-white ethical guidelines to follow, employees may see every issue as gray. As leader and business owner, part of your job is to model the type of behavior you expect. Minimize motivating factors. Why would someone at your place of business be likely to commit fraud? For kickbacks, higher commissions, raises and promotions, or bonuses? Sometimes knowing the possible motivations can help you spot vulnerabilities, identify suspects, and remove some of the motivation. Increase the penalties. Let everyone in your business know the price for committing fraud -- dismissal and possible prosecution. Follow through on policies and make a public display of it, so your entire staff gets the message that you're serious about clamping down on fraud. Identify the opportunities for fraud in your system. Where is fraud likely to occur in your business? Identify the gatekeepers who approve transactions. Identify the documents that may be more prone to forgeries and fabrications. Implement a system of checks and balances. The more people involved in a transaction, the less open it is to fraud. Transactions should be approved by one or more other individuals who've been sufficiently trained to spot and stop fraudulent transactions. The more eyes you have out looking for trouble, the more likely someone will spot it. As leader and business-owner, you need to be spot-checking transactions yourself; otherwise, fraud can be occurring right under your nose without your knowledge of it. Check and cross-check identification. Require that all employees who are responsible for receiving and processing signed documents carefully check the signer's identification. They should check the driver's license with a black light (to make sure it's not a cheap counterfeit) and cross-check the license against additional pieces of identification. Take photos and thumbprints. A digital camera behind the desk that films anyone who shows up to submit a document is an effective deterrent. Few criminals will perpetrate a crime when they know they're being filmed. Also consider having anyone involved in a transaction leave a thumbprint. Audit files regularly. A complete and detailed audit of all transactions that flow through your office is best. Spot-checking files is not quite as effective, but it's better than nothing. Always include files from your "best clients," because con artists like to do lots of business with "cooperative" businesses. Perform background checks on prospective employees. A background check help you weed out the obvious (convicted) con artists, although it's certainly not 100 percent effective. Fraud often goes unreported because companies who report it are afraid that the criminal will file a lawsuit against them. When they are caught, people who commit fraud often simply move their operation to another company. Educate employees. Employees need to be able to spot the red flags of fraud and know exactly the person to contact to report suspicious activity without suffering any negative consequences. Education is the best defense against fraud. Designate two or more employees as fraud point persons. Whenever an employee suspects fraud, the employee should be able to contact the point person who can then take the necessary action or contact a real estate and mortgage fraud consultant (kept on retainer) who can provide further guidance on how to proceed. Over 80 percent of real estate and mortgage fraud involves industry insiders, including appraisers, loan officers, and real estate agents. Don't let your business go bust because you creating a fraud-friendly environment. Be proactive. Send the message that you won't tolerate fraud, and that you will hold your staff accountable. Then, provide your people with the information and tools they need to STOP fraud:
Spot, Stop, Post, and POTS (Point Out The Scam).
