Preventing wire fraud is an orchestrated effort.
At the end of yet another unprecedented year of change and evolution, the commercial real estate industry continues to thrive. But with so many transactions closing – particularly as we look toward the end of Q4 – continuing to protect our businesses from fraud remains one of our most important responsibilities. At First American Title National Commercial Services, we continue to practice considerable caution and employ advanced technology software that helps safeguard our clients’ transactions from fraud. That said, preventing wire fraud requires constant vigilance by all parties to the transaction, because cyber criminals are only getting smarter – and their methods more sophisticated.
"From my view, wire fraud attempts are far more frequent, and there are so many new ways fraudsters are attempting to steal funds,” said Shelliza Lallmohamed, escrow manager for our National Commercial Services New York City office. “When I started at First American six years ago, this rarely was an issue. Now, we’re seeing it all the time.”
One reason for that, according to Lallmohamed, is that people are now more familiar with the title company’s role in a real estate transaction.
“They’ve also become more aware of how we communicate with our clients,” Lallmohamed added.
How wire fraud occurs
That familiarity in how we communicate between transactional parties is key to how fraudsters operate. In fact, according to the National Association of Realtors, the highest reported fraud in real estate in 2020 was Business Email Compromise/Email Account Compromise (BEC/EAC). In a BEC/EAC scam, fraudsters might assume the identity of a transactional party – the title agent, real estate attorney, escrow officer, etc. – and provide new instructions via email to wire funds directly into a fraudulent bank account.
“We notice that many of the people we work with are not on secured networks,” Lallmohamed said. “This can make it easier for criminals to hack into email accounts in order to impersonate transactional parties in an attempt to divert funds.”
While they are often unsuccessful, fraudsters continue to be relentless. In fact, according to the American Land Title Association, cyber criminals target one in three real estate transactions.
Preventing Business Email Compromise/Email Account Compromise
BEC/EAC scams can be difficult to catch – particularly as fraudsters become more sophisticated. According to the FBI, scammers use a variety of methods to impersonate a trusted source (like a title company or real estate agent). Some of these include spoofing an email account by using slight variations of a legitimate email address, sending spear phishing emails that appear to be from a trusted sender to solicit confidential information, or even using malware to infiltrate company networks in order to access email threads about wires, billing, invoices, etc. According to Nori Strong, head of Escrow Operations at First American National Commercial Services, some of the biggest “red flags” of wire fraud include:
- Emailed instructions marked as “immediate”, “urgent”, “high importance” or “secret”
- Customer’s email account differs from what we know it to be (sometimes fraudsters change one letter and it is easy to overlook when skimming through it)
- Wording that is grammatically incorrect, misspelled words or names
- A change in the wire instructions originally received or in the method of payment; for instance, you are initially directed to make disbursement by check then at the last minute they change it to a wire
Additionally, some actions you can take now to prevent wire fraud include:
- Do not call phone numbers contained in emails or the actual instructions unless you’ve verified that contact by another means (Google, etc.)
- Never rely on incoming phone calls to verify wires; instead, make the call to a known person at a known number
- Do not talk to a person we’ve been referred to and never accept a response that they will have to call us back or have someone call us back
- Carefully review payoff letters looking for: different font; misspelled names; wrong bank; typos; never use contact info contained in the document to verify the wire
- If the wire is rejected, say for instance, it has the wrong ABA number, stop everything and make sure the error was legitimate and that you are not dealing with a fraudster
- When we are asked to wire to a foreign bank; this becomes critical as once the money is wired internationally it’s almost impossible to get it back
“But as scammers get more sophisticated, so do we,” Lallmohamed said. “Not only do we have best practices in place to detect possible email fraud, but we also launched a new technology, ClarityFirst®, which provides our clients with secure wire verification requiring two-factor authentication. By using ClarityFirst to send and verify wire instructions, we can mitigate the risk of a BEC/EAC scam jeopardizing the transaction.”
ClarityFirst is a first-of-its-kind, comprehensive technology solution for commercial real estate transactions. In addition to increasing the security of your transaction, ClarityFirst also provides a robust property information tool set, order milestone tracking, document sharing, and more – available 24/7 from your desktop or mobile device.
To learn more about ClarityFirst, visit ClarityFirst.com.