Wire Fraud: Staying safe when it matters most

What is Wire Fraud in Real Estate?

In the real estate context, wire fraud involves scammers impersonating real estate agents, title companies, attorneys, or other parties involved in a transaction. The fraudsters typically use email to contact the homebuyer, presenting themselves as a legitimate party and instructing the buyer to wire their closing funds to a different bank account, often under the pretense of a last-minute change. The critical issue with wire fraud is that once the money is transferred to the scammer's account, it is almost impossible to recover. Here are some examples of what wire fraud looks like in the real world.

1. Washington D.C. Title Company Heist: In this case, scammers executed a phishing scam that allowed them to access the email server of Federal Title & Escrow. They impersonated the title company in communications with clients, providing false wire instructions. As a result, buyers Sean Smith and Erin Wrona lost $1.5 million. The case escalated to a lawsuit against Federal Title and Escrow for the lost funds and additional damages, with the victims questioning the company's role in the fraud​​. It is important to know that wire instructions should never be given through email, had the Wronas known this, the fraud may have been avoided.
2. New York City Real Estate Lawyer Scam (2017): In another high-profile incident, New York State Supreme Court Justice Lori Sattler was tricked into sending over $1 million to fraudsters. The criminals sent her fraudulent wire instructions during her apartment purchase. This case demonstrated that even highly educated and experienced individuals could fall victim to these sophisticated scams. The stolen funds were transferred through various accounts, eventually ending up in Hong Kong, leading to speculation that this could have been an inside job involving parties aware of the transaction details​​. Wire instructions should always come from an expected source and through an expected channel. It never hurts to verify with your title agency directly that the instructions you have are legitimate.

How Does Wire Fraud Work?

Despite its seeming simplicity, the process behind this fraud is complex and often involves the scammer conducting careful reconnaissance, such as hacking into a realtor's or title company's email account, studying transaction patterns, and even mirroring professional communication styles. Being aware of this method of operation provides a crucial foundation for recognizing red flags and thwarting potential wire fraud attempts.

Identifying and Preventing Wire Fraud

The process of identifying and preventing wire fraud can be complex, but it's vital for ensuring the safety of your clients' funds. Here's a detailed look at key steps that can help you navigate this process more efficiently.

Know Your Closing Process

The first step in preventing wire fraud is understanding the closing process inside and out. This includes knowing who the key players are and knowing what to expect at every stage. The more familiar you are with the process, the easier it will be to spot anything out of the ordinary that could indicate a fraudulent attempt. 

Save Contact Information

Always have a list of the contact information for everyone involved in the transaction. This includes your title company, lender, and real estate agent. Having this information at hand allows you to quickly and directly verify any unusual or suspicious communication.

Beware Of Last-Minute Changes

One of the most common tactics employed by fraudsters is making last-minute changes to the closing process—especially in regards to payment or wiring instructions. These changes might be communicated through an unexpected email or phone call, expressing urgency or a sudden decision by the lender or title company due to a variety of crafted reasons such as "technical issues" or "policy changes". 

These requests often sound legitimate and may even include official-looking letterheads or logos. Remember, any genuine last-minute changes will be communicated through established channels and will rarely require immediate action without thorough explanation and consultation.

This step of verification should be practiced even if the change seems minor. For example, if a new bank account number is provided for the transfer of funds, it's critical to confirm this information with the title company or lender directly, as this could be a scammer's account. Never validate such changes through the contact information provided in the questionable communication, as it could be part of the scammer's set-up.

Call To Confirm

Before your client sends money to any account, take the time to confirm the wiring instructions over the phone. This should be done using a verified phone number that you have on file, not the c ontact information provided in the questionable email. This step is absolutely critical and can be the difference between a successful closing and a major loss.

Don't Trust Email

Email is not a secure method of communicating sensitive financial information. It can be easily intercepted by hackers, providing them with the information they need to commit fraud. Always use a secure method to share financial details, such as encrypted email or a secure document-sharing platform.

Be Wary Of Phone Calls

While it's important to verify information over the phone, be aware that fraudsters sometimes impersonate professionals over the phone, too. If you receive a call from someone claiming to be your title company, lender, or real estate agent, and they're asking for sensitive information or pressuring you to wire funds immediately, be suspicious. Hang up and contact the supposed caller directly using their known and verified contact information to confirm the conversation.

Other Warning Signs

While the previously mentioned tactics are some of the most common, there are other warning signs of wire fraud that you should be aware of. These include:

• Emails with Poor Grammar or Spelling Mistakes: Professional emails from your title company, lender, or real estate agent should be free of typos and grammatical errors. An email full of mistakes could signal that it's a scam.
• Unexpected Email Attachments: Be cautious of unexpected or unsolicited email attachments, even if they appear to be from a trusted source. They could contain malware that will give the fraudster access to your computer and sensitive information.
• Pressure to Act Immediately: Scammers often create a sense of urgency to prevent you from verifying information. If you feel rushed or pressured to wire funds, pause and take the time to verify the request.
• Unusual Email Addresses or URLs: Scammers may use email addresses that look similar to a trusted source but are slightly altered. Check email addresses and URLs carefully to ensure they match the official ones.
• Requests for Personal Information: Be wary of any requests for personal information via email, such as social security numbers or bank account details. This is likely a phishing attempt.

Remember, the best way to prevent wire fraud is to stay vigilant, question anything that seems out of the ordinary, and always verify information through trusted and established channels. 

By following these steps, you can significantly reduce the risk of falling victim to wire fraud and ensure that both you and your clients have a positive, secure transaction.

What To Do If You Suspect Wire Fraud

If any of the warning signs mentioned above are detected, your immediate actions can be crucial. Here's what you should do:

1. Stop and Think: Do not act on the instructions in the suspicious email.
2. Reach Out Directly: Contact your title company, lender, or real estate agent through a known and trusted phone number. Do not use any contact information provided in the suspicious email.
3. Report: Notify your bank and, if necessary, the authorities.
4. Follow-up: Stay in contact with your bank and other involved parties to ensure the situation is being handled.

The crucial point is to trust your instincts. If something doesn’t feel right, pause and seek advice before taking any action.

How Do I Prevent Wire Fraud in Future Real Estate Transactions?

The best defense against wire fraud is awareness and preparedness. Here are a few tips:

Verify All Communication

Every piece of communication, be it an email or a phone call, should be scrutinized. Fraudsters can mimic professional communication styles and use email addresses that look strikingly similar to trusted sources. It’s crucial to double-check the sender's email address and always reach out directly to the supposed sender through a known and verified contact if any correspondence appears suspicious. 

Safeguard Your Information

Sensitive information such as bank account details, social security numbers, or any other personal data should never be shared over email or phone. Email is particularly unsecure and can be easily intercepted by cybercriminals. When it's necessary to share such information, use encrypted email or a secure document-sharing service. This adds an extra layer of security and makes it harder for fraudsters to gain access to sensitive data.

Educate Your Clients

As a realtor, it's your responsibility to ensure your clients are well-informed about the risk of wire fraud. They should be made aware of the common signs of fraud, such as urgent requests for fund transfers, last-minute changes to banking details, and emails with poor grammar or spelling mistakes. Encourage them to always verify any instructions regarding money transfers and to reach out to you directly if they receive any suspicious communication.

Work with Trusted Professionals

Choosing to work with a title company that takes fraud prevention seriously can significantly reduce the risk of wire fraud. Trusted professionals have the expertise to identify potential fraud attempts and have measures in place to ensure secure transactions. At Bluegrass Land Title, for instance, we use CertifID for all wire transfers and will never ask clients to transfer funds outside of this tool.

Use Multi-Factor Authentication

Multi-factor authentication (MFA) is a security measure that requires users to provide two or more verification factors to gain access to a resource. This could be something you know (a password), something you have (a phone), or something you are (a fingerprint). MFA provides an additional line of defense and makes it more difficult for unauthorized users to gain access to sensitive information.