Wire Transfer Scams Involving Real Estate Transactions: How to Prevent Fraud with Effective Email Security

Wire transfer scams in the real estate industry are on the rise. Buying a home should be a joyful, celebratory affair; however, in reality, wire transfer fraud victims around the world are losing their life savings in the closing process every day.

Criminals are taking advantage of the complex and hurried nature of the real estate, which makes these scams relatively easy to carry out and often effective. The number of vulnerable parties involved in the real estate closing process - attorneys, lenders, agents, title companies, sellers and buyers - also works to attackers’ advantage. 

Many wire transfer scams happen via a highly targeted phishing attack. A mortgage phishing scam is initiated with the compromise of either a realtor or a title company's email account by malware sent via email. In these phishing scams, criminals attempt to divert closing costs and down payment into a fraudulent account by confirming or suggesting last-minute changes to wiring instructions. The real estate sector is ill-prepared to deal with this serious and ever-evolving email threat, and in general, companies in the real estate industry underestimate the importance of investing in a comprehensive and highly effective cloud email security solution.

Just a few days ago, the Better Business Bureau warned of the dramatic increase in real estate fraud in a new report highlighting real estate email scams. In a recent interview about this report, Better Business Bureau investigations specialist Steve Baker states, “We found that 80% of businesses have gotten one of these emails in the last year.” The FBI has also spoken out on the issue, reporting that between 2017 and 2018 there were a 166% increase in US real estate wire fraud losses (experts believe that as little as 15% of this fraud is reported). With an average loss of $179,000, real estate fraud often derails transactions, leaving victims homeless.

Earlier this year, a Foxconn executive and his wife lost $260,000 in a fraudulent wire transfer involved in the process of closing on a home. It wasn’t until after the transaction was complete that the victims learned that the emails were not actually coming from the title company, but instead someone who was impersonating their identity using a similar looking email address. In August, a woman lost $45,000 in a wire transfer scam while closing on a house in Forest Hill, Texas. Gracie Veronica (the victim) explains her devastation: “It was an enormous amount of money and I worked so hard for it. For someone to just come in a matter of seconds and take away something I’ve been saving up for years is truly devastating.” Unfortunately, the list of successful wire transfer scams and their heartbreaking consequences goes on.

Because email is a popular method for providing instructions for sending funds at closing, it often takes the blame when a wire transfer scam occurs, and it is inaccurately labeled as an inherently “insecure” or “risky” method of sharing sensitive information. However, by implementing basic email security best practices and investing in an effective cloud email security solution, real estate companies and agents can mitigate their risk of falling for a dangerous and costly wire transfer scam.

Leaders in Real Estate Industry are Taking Notice of Wire Transfer Fraud and Responding  

Wire transfer scams & estate frauds have become so prominent and problematic that in July 2019, American Land Title Association (ALTA), Community Mortgage Lenders of America, American Escrow Association, Real Estate Services Providers Counsel, among others, announced the creation of a Coalition to Stop Real Estate Wire Fraud, which aims to educate both real estate professionals and consumers about the dangers of wire fraud.

How Do Wire Transfer Scams Involving Real Estate Transactions Work? 

Wire transfer scams that impact the real estate industry are usually fairly simple and straightforward, but a disheartening number of companies and agents fall for them nonetheless. Multiple Listing Service and syndication sites like Zillow and Trulia enable threat actors to identify pending homes sales and profile all parties involved in the transaction. Then, a criminal hacks into a title company or lender’s email server or computer system, where he or she quietly sits and waits, reading emails and studying language use and communication patterns. Once the moment is right, he or she emails the buyer or financial institution from a spoofed email account with fake wire transfer instructions pertaining to a particular real estate loan closing. Threat actors frequently go as far as to call victims to reinforce that their fake wire transfer is legitimate. In a successful scam, the buyer or financial institution follows the bogus instructions to generate the wire transfer request. Once the funds are sent, the criminal moves on to his or her next victim.

Scams are usually not discovered until the title company or closing agent informs the buyer or financial institution that they did not receive the anticipated funds.

These criminals rely on trust. They know you trust your real estate agent, your lawyer or the bank, and they exploit that trust to steal from you.

- Coalition to Stop Real Estate Wire Fraud

What to Do if You Think You’ve Been Robbed:

If you suspect that you’ve been robbed in a wire transfer scam, it is critical that you act fast! Detecting that you sent money to the wrong account and contacting your bank within 24 hours provides the best chance of recovering your money. If you’ve been targeted in a scam:

• Call your bank immediately and ask them to issue a recall notice from your wire.
• Report the crime to IC3.gov. The FBI monitors these complaints regularly.
• Contact both your regional FBI office and your local police department. They may be able to help.

Best Practices for Recognizing and Preventing Wire Transfer Scams

Best practices for recognizing and preventing wire transfer fraud and stopping these scams before they result in losses include:

• Be on the lookout for common red flags that are associated with any compromised email. These include a sense of urgency, misspellings, poor grammar and emails sent outside of normal business hours.
• Be wary of emails that contain changes in payment type, such as changing from a certified check to a wire transfer, or changing account numbers at the last minute.
• Credit unions should require title companies to send wire transfer instructions using encrypted email.
• Credit unions should establish procedures to verify the legitimacy of wire transfer instructions received by email. They should also establish a passcode in advance, which can be used for verification purposes with a closing agent or title company.
• Credit unions should always confirm that members received wire transfer instructions via email and, if they did, credit unions should verify information and instructions with the closing agent or title company individually before sending funds on a member’s behalf.
• If you are unable to verify wire instructions, send a check instead of wiring funds.
• If you are in a business that regularly wires funds, check with your insurance company to see if you can obtain insurance to cover losses from wire fraud.
• Companies and credit unions should educate agents, members and employees about wire transfer scams, warning them about what to look for and how to best protect themselves from this threat.
• Both title companies and credit unions should ensure that they have implemented an effective business cloud email security that provides complete, end-to-end control of their email and prevents fraudulent mail from reaching the inbox and perpetuating wire transfer fraud.

How Guardian Digital Can Help

Guardian Digital EnGarde Cloud Email Security can drastically reduce your risk of falling for a wire transfer scam and having to deal with the financial heartbreak that often results. EnGarde provides comprehensive, fully-managed business email protection. This complete, end-to-end email vigilance prevents fraudulent emails from reaching the inbox. Some key benefits associated with implementing EnGarde Cloud Email Security include: 

• A multi-layered, open-source approach to email security, where individual layers work harmoniously to provide comprehensive, resilient protection
• Automatically adjusting detection algorithms that anticipate attacks
• End-to-end email encryption and secure delivery
• Authentication of every email delivered using DMARC, DKIM and SPF
• Centrally managed cloud-based administration
• Seamless implementation and unrivaled 24x7x365 customer support

The Bottom Line

Wire transfer scams pose more of a threat to the real estate sector than ever before. While companies, agents and buyers should be wary of fraud, these scams are largely preventable by implementing general email security best practices and, most importantly, ensuring that you have reliable, comprehensive email security in place.

Have Additional Questions about Wire Transfer Scams Involving Real Estate Transactions?

Do you have any additional questions about wire transfer scams involving real estate transactions that have not been answered in this article? If so, please contact us and we would be happy to answer them!