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Best Practices for Preventing Real Estate Wire Fraud

Updated: Jan 22

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In real estate, it's imperative to be vigilant against fraudulent activities. Cybercriminals can easily deceive you if you lower your guard. But, armed with knowledge and preparation, you can safeguard yourself from falling victim to scams. Preventing wire fraud involves attention to three critical elements - shielding communication accounts, such as email, from unauthorized access to prevent cyber criminals from gathering vital transaction information; ensuring the security of wiring details and contact information for the intended recipient of wire transfer funds to keep them uncompromised, and, educating all parties involved in the transaction about the potential risks of fraud and what red flags to be aware of. By prioritizing education and implementing preventive measures, you can significantly reduce your vulnerability and protect yourself and your clients from the perils of fraud.

Be on the Lookout

Cybercriminals often follow recurring patterns when orchestrating wire fraud schemes. The foundation of fraud prevention lies in recognizing the initial stages of these scams. Common elements in fraud include:

  • Information Gathering - Fraudsters begin by scouring publicly accessible data sources such as social media platforms, company websites, and online databases to collect information about anyone involved in the transaction, which may include buyers, sellers, real estate agents, lenders, settlement providers, attorneys, and various other participants.

  • Spear Phishing - Cybercriminals target these identified participants with specialized phishing emails designed to steal their email account credentials.

  • Gathering Transaction Details - With illicit access to these accounts, the fraudsters exercise patience and extract comprehensive details about the transaction and its involved parties, exposing other stakeholders, who may become individual targets or fall victim to spoofed communications from the fraudster.

  • Execution of the Fraud - The fraudulent activity commences once the fraudster determines that a fund transfer is imminent. Using the compromised email account or a convincingly spoofed address, the scammer dispatches deceptive emails containing counterfeit wiring instructions to the unsuspecting victim, which may involve a buyer wiring closing funds to the title company or the title company transferring funds to a broker, seller, or current mortgage holder during the disbursement process.

  • Money Diversion - Upon successfully receiving funds in the fraudster's account, the money is swiftly rerouted to other bank accounts or withdrawn as cash, often achieved through an intricate network of money mules ready to execute real-time instructions.

Most Common Wire Fraud Entry Point

As real estate transactions increasingly migrate to online platforms, there has been a notable surge in phishing attempts. Phishing is a fraudulent technique in which criminals endeavor to impersonate reputable businesses or familiar individuals via email. Among the various forms of phishing, Business Email Compromise (BEC) is the most prevalent nationwide. BEC entails a scheme in which wrongdoers exploit email communication to deceive individuals into transferring funds to an account controlled by the fraudster. Typically, BEC unfolds through a three-step process:

  1. Email Takeover - In the initial phase, a criminal gains unauthorized access to the email account of a known party, referred to as an "email takeover."

  2. Monitoring and Waiting - The criminal closely monitors email communications, patiently biding their time until a monetary transaction is imminent.

  3. Impersonation and Fund Transfer - Armed with this information, the criminal utilizes the compromised, authentic account or crafts a convincingly spoofed email address to pose as the known party. The criminal then issues new instructions, directing the recipient (often the buyer) to transfer funds to an account under control.

For example, if the victim is the buyer, the spoofed email may be designed to resemble a message from the escrow officer, the buyer's real estate agent, or even the buyer's lender. This deceptive message may urgently request the immediate transfer of closing funds.

Protect Yourself

It is important for you as a title agent to educate your referring partners and clients on the dangers of wire fraud. When you receive a new title order, make sure you send information on wire fraud to the buyers (this can be in their welcome packet or through an email). Another simple but effective measure is to have a warning or important notice about wire fraud in your email signature. You can use the following language. “IMPORTANT NOTICE: Never trust wiring instructions sent to you via email. Cyber criminals are hacking email accounts and sending emails with fake wiring instructions. These emails can be very convincing. Always independently confirm wiring instructions – either in person or via a telephone call to a trusted and verified phone number. Never wire money without double-checking that the wiring instructions are correct.”

At Conestoga Title, our team stays abreast of the latest developments in wire fraud prevention through ongoing education, which ensures that we are well-prepared to address potential issues and defuse them proactively before they escalate. Contact us today and put your wire fraud concerns behind you!

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