Wire fraud has become rampant in our industry. The FBI received 351,937 Business Email Compromise Complaints (BEC) in 2018 or over 900 complaints per day, most of them involving some type of wire fraud. The Internet Crime Center (IC3) was formed in May of 2000 and has received a total of 4.4 million complaints since being formed. In the US, BEC scams accounted for 1.3 billion dollars in losses.
The real estate industry has been targeted by fraudsters because our business moves at a quick pace with a lot of funds on a regular basis. The criminals continue to strengthen their efforts to abscond with buyer, seller and realtor money. Below are some tips for how we can help educate our buyers and sellers about how important it is to be cautious in their transactions.
1. Consumer education.
The biggest key to prevention is education of your customers. As a realtor you should be laser focused on educating the buyers and sellers about the growing risks of wire fraud. At every opportunity take the time to explain that wire fraud has become prevalent and explain how we, the title company, will deliver wiring instructions. Buyers and Sellers should understand that if they receive a phone call, fax or email regarding wiring of funds, they must call a previously validated title company phone number to verify the funding information. Always caution the client about contacting the title company from an email signature. Criminals have become sophisticated at sending fraudulent communications pretending to be the Realtor, the title company and the lender.
Wire Fraud Criminals send emails with identical looking signature blocks of one of the parties to the transaction but replace the phone numbers with ones the criminal will answer if someone calls. A good tip is to ask your clients to program the title company phone number into their cell phones when they go under contract or even at listing. This way they are calling us on a trusted phone number and not from any other resource that might be fraudulent.
Buyers should be forewarned by their realtor that no one in the transaction should send them wiring instructions other than the title company. Even when the title company sends wiring instructions it should be only upon request from the customer and the customer should never initiate a wire without personally calling the title company from a verified phone number to verify the wiring instruction data.
A realtor should never take on the responsibility of sending wiring instructions to their clients. Wire instructions should only be sent by the title company. After having the wire fraud phone or in-person conversation with your client, agents should (1) have their clients sign a disclosure regarding wire fraud dangers, (2) send them an email confirming your conversation about wire fraud and (3) ask your clients to reply back to your email acknowledging that you have discussed all the issues involving wire fraud with them. These are recommendations from defense law firms for what they need to properly defend agents if their clients are the victim of wire fraud and decide to sue their agent.
On the seller side of the transaction, you should counsel the clients to bring a physical copy of their wiring instructions to closing. The sellers should not email their account information. Instead they should bring the instructions to closing. All sellers should be counselled to not respond to email inquiries requesting their account number or wiring information.
Also, make sure that we have your buyer or seller’s phone number. When we receipt the contract we will call your buyer and seller to talk to them about the transaction. We will reiterate the warnings that you are giving them and we will help remind them how important it is to follow our instructions.
2. Contacts Log.
Before you go under contract create a log of all approved parties’ phone numbers to give to your buyer or seller. Providing the clients with a verified phone number to use at the beginning of the transaction is a must. Programming the title company number into their phone should help minimize the possibility of a fraudster sending them a different phone number to use via email.
3. Confirmation of wire instructions for Realtors.
Many realtors today have a portion of the commission wired. If you fall into that group make sure you are available by phone to verify the wiring instructions. Criminals are hacking emails and sending in fake wiring instructions for commissions too!
4. Two-Factor Authentication.
Implementing Two-Factor Authentication for your email and all applications requiring a login is extremely important. All parties to the transaction, especially real estate agents, should be encouraged to enable Two-Factor Authentication on the email service they utilize. This site lists systems that implement Two-Factor Authentication: https://twofactorauth.org. After you have turned on your Two-Factor Authentication make sure to change your password one time to clear out any prior access.
5. Secure email.
All email involving nonpublic, private and confidential client information should be sent utilizing secure email systems. Here is an article from NAR regarding NAR Best Practices.
6. Cyber protections.
Realtors should implement industry standard IT security and cyber protections of their email and computer systems including but not limited to: 1) utilizing strong antivirus software, 2) installing security patches for all operating systems and software applications, 3) logging out or locking their computer when leaving their computer unattended, 4) avoid clicking on suspicious links on websites or within emails and 5) avoid using free WIFI or free charging stations. Free WIFI pretending to be legitimate businesses is often operated by criminals and allows them to access everything being transmitted over WIFI.
When fraud happens! If you suspect a fraud is underway or has happened, act immediately! Contact as many people as possible at your management team as well as at the title company. The bank and FBI need to be contacted immediately among other steps that must be taken. The Cybersecurity unit of the Department of Justice has published the following guidelines for reporting cyber incidents: Click here to learn their guidelines. Here is the link to the complaint form: https://complaint.ic3.gov/default.aspx
Our executive team at Texas National Title is committed to helping our clients talk to customers about preventing wire fraud. David Tandy (CEO) and Latra Szal (COO/Counsel) have been teaching many classes on the topic to local realtor groups. If you would like to schedule a class or conference for your office to discuss further please let me know and we will get something scheduled.