Theresa M. Kraa
Let's Talk Frankly About Fraud
Updated: May 10, 2020
If you've heard news about Wire fraud happening during real estate transactions, you can be sure that it is a problem that is not going away. In fact it is a fast-growing problem that is seen throughout all 50 states and in many different countries around the world. This type of fraud is found in any type of transaction; residential, commercial and land deals and is also known as BEC. BEC is short for Business Email Compromise. These hackers will target the emails of Real Estate Agents, Title Companies, Law Firms, Sellers and Buyers and will attempt to impersonate this person to obtain sensitive information or to install malware onto their computer. It only takes one person in the transaction chain to be affected, to give them the door to see the information.
According to the FBI’s Internet Crime Complaint Center (iC3), from 2015 to 2017 there was an 1,100% increase in reported victims and a 2,200% increase in reported losses. Between October 2013 and July 2019, over $10 Billion of losses were reported in the United States. The FBI estimates there is an average of $8 Million in losses each month in real estate transactions in the United States.
Don't fear, there are ways to detect whether the email you are receiving is from a hacker or not. Be on the lookout for these “red flags”:
Multiple or changed wiring instructions. Wiring instructions are rarely changed because business bank accounts are not frequently changed. Some bogus reasons that have been given for changed wiring instructions may include: “the account has been closed” or “the account has been placed on hold by the bank and is not effective at this time”.
Bad Grammar. Many (but not all) fraudsters are foreign and may misspell words, use a word or phrase incorrectly or not as commonly spelled or spoken in American English. For example, “authorisation (British) vs. “authorization” (American).
Unusual Wire Recipient. Generally, deposits and closing funds are wired to accounts in the name of a settlement attorney, an escrow or title company or the real estate broker holding earnest money. Any other payee on the account should be considered to be a red flag.
Changed or spoofed email address. The changes may be subtle and missed if somebody is in a rush. For example, instead of Baker@TheTitleCompany.com the email address might be changed to JohnBakerTheTitleCompany@gmail.com or there could be a very subtle change to the name such as John.Baker@yahoo.com to John.Bakar@yahoo.com. However, sometimes the fraudsters are able to hack into the actual email account and send emails from it, so be sure to be cautious when the email message concerns money transfer information.
Does the communication make sense in the context of the transaction? For example, is the “settlement agent” asking for a wire so they can send a check for the closing?
In general, you can protect yourself with these tips:
Be cautious if the person on the other end of the emails wants to rush things. Fraudsters want to create an urgency and cause you to rush because that increases the chance you will miss “red flags”.
Only send information to the person(s) who need it. Be cautious with “reply to all”. The more people that are on an email string the higher the chance that your email goes to a fraudster.
Be cautious before clicking on a hyperlink sent by an unknown person and “hover” over links before clicking to see a preview of where it will take you.
Keep all software patches on and all systems updated.
If you discover you are the victim of a fraudulent incident, immediately contact your financial institution to request a recall of funds. Don't wait to do this as time is not on your side!! You should also file a complaint with the iC3 at www.ic3.gov.
In closing, always rely on your trade professional in a real estate transaction. When it comes time to move money, it is always best to CALL the person that is receiving the money PRIOR to initiating the wire transfer. You will need to confirm the account numbers and the banking institute it is being sent to. It is best if you are able to do this in person at your bank branch so that the representative can process it in front of you and possibly the recipient at the same time. With large amounts of money, taking every precaution you can should be done. No one should fault you in taking extra steps to secure your own money.
I hope this information has helped make any one person more aware of this growing threat to the real estate industry. It can be avoided with education and a few ounces of precaution.
©Copyright 2020 Reinvest In Orlando - Theresa M. Kraa, REALTOR®, NHCB