Wire Fraud

Wire Fraud

Buying a home, especially the first, is supposed to be an exciting time. However, the very nature of real estate transactions, where large amounts of money are transferring between parties, makes them a prime target for fraudsters.  Increasingly, financial institutions and home buyers are falling victim to wire transfer scams connected to real estate closings.

What makes this type of scam so appealing to fraudsters and easy to pull off? The nature of the real estate closing process, and the fact that email is a commonly used method for providing instructions for sending funds at closing.

Here is how the fraud works:

  • A fraudster hacks into a settlement company’s, lender’s or agent’s email server or computer system to search for upcoming real estate closings;
  • The fraudster then emails the buyer or financial institution with bogus wire-transfer instructions related to a specific real estate loan closing;  
  • The fraudster may also setup forwarding rules by which emails are forwarded to a third party e-mail address;
  • The buyer or financial institution then follows the bogus instructions to generate the wire transfer request. Once the funds are sent, the fraudster moves on.

Unfortunately, this fraud is usually only discovered when the title company or closing agent informs the buyer or financial institution that they did not received the anticipated funds.

We can guard against this type of fraud in the following ways:

  • Each party in an email should always check the source of the email, specifically the actual email address, not just the name that appears
  • Settlement companies should establish procedures whereby clients call a confirmed phone number to verify the legitimacy of wire transfer instructions received by email or fax;
  • Establish a passcode in advance to be used in conjunction with the call back and verification process;
  • Settlement companies and lenders should use encrypted emails when sending wire transfer instructions or even discussing final closing numbers;
  • Look for common red flags that are associated with any compromised email, such as misspellings, poor grammar, a sense of urgency, and emails sent outside of normal business hours; and
  • Be suspicious of emails that contain changes in payment type, such as changing from a certified check to a wire transfer, or account numbers at the very last minute.

Finally, it’s important to educate yourself about the possibility of this scam and how to protect yourselves. It takes a team to prevent this from happening.

  • Posted by Hanger Law