- Did You Know?
- August 18, 2017 | Authors: Matthew D. Alegi; Sarah D. Cline; David A. Pordy; Danielle M. Dolch; Marc D. Lipman; David M. Kochanski; James E. Savitz
- Law Firms: Shulman, Rogers, Gandal, Pordy & Ecker, P.A. - Potomac Office; Shulman, Rogers, Gandal, Pordy & Ecker, P.A. - Washington Office
Did you know ... that everyone is talking about wire fraud? You should be too!
Unfortunately, wire fraud continues to be a serious concern for both consumers and professionals involved in real estate transactions. Throughout the summer, the American Land Title Association, the Consumer Financial Protection Bureau, the Federal Trade Commission, FinCEN and the FBI have all warned of the danger of wire fraud. Fraudsters use several different methods to target individuals and companies. One method is the use of “phishing” schemes: the fraudster sends an email containing malicious malware that will provide complete access to the victim’s computer and email. For the intrusion to be effective, the intended victim would need to click on a link or open an attachment to allow the malware to access passwords and important financial information.
Hackers familiar with the mechanics of real estate transactions are using their industry knowledge to specifically target those responsible for sending wires. In these schemes, hackers gain access to the email accounts of real estate agents, lenders, title agents and consumers. Sometimes, hackers gain access before the transaction is even born, and continue to monitor the hacked account for new deals to target. Since most settlement funds are delivered by wire transfer, the hackers wait until right before settlement and send an email (usually purporting to be from the real estate agent, title agent or seller) notifying the intended victim of a change in the wiring instructions. The hacker requests that the funds (either the buyer’s cash for closing or the seller’s proceeds) be sent to the new account. Once the wire is sent, the hacker promptly re-wires the funds out of the country. According to FBI data, between October 2013 and May 2016, wire fraud occurred in all 50 states and in 100 foreign countries. In the United States alone, there were 14,032 victims, suffering losses of just under a BILLION dollars! Clearly, this is a dramatic issue for the real estate industry, and precautions are essential to minimize the chances of falling victim to any of the fraud schemes. To help your clients better understand the dangers of wire fraud, consider sharing this consumer-friendly video created by ALTA.
There are several precautions that real estate professionals can take to protect themselves and their clients from wire fraud. First, avoid being the middleman. In other words, do not forward emails about wires from the title agent to the buyer or seller, and vice versa. Educate your clients about the risks of wire fraud, and instruct buyers and sellers to communicate directly with the title agent about the delivery of settlement funds. Let your clients know that you will never email them to provide or change wiring instructions and that they should disregard any email purporting to be from you that does.
Second, if you do have to facilitate delivery of wiring instructions, be suspicious of any wiring instructions you receive and adopt the following best practices.
• Make sure that any instructions received via email are password protected; unsecured wiring instructions delivered via email are suspect. Do not provide the password via email; only provide it over the telephone at a verified number.
• Always call the intended recipient to ensure that the wiring instructions are accurate and the account name is correct. Regardless of when and how the wiring instructions are received, advise your buyers to call the title agent immediately before sending the wire to double-check that the instructions are legitimate and correct. Once the wire is sent, immediately call the title agent to confirm receipt.
• Be especially suspicious of any last-minute emails purporting to change the wiring instructions. It is extremely rare for a title company or attorney to change bank information, particularly at the last minute, and such emails are likely to be part of a fraud scheme. In these instances, a little paranoia is probably a good thing.
• When responding to an email about wiring funds, forward your response to a verified email for the recipient, rather than hitting “reply”. Fraudsters often use email addresses that are very similar to the correct email address, but it may have a single letter or number different that could be confused with the correct address.
• If there is a diversion of funds through a fraud scheme, the best (and perhaps only) chance of recovering the funds is immediate action. In the event of a diversion, immediately contact the Federal Trade Commission, the FBI, the Secret Service and your local Attorney General.