Don’t Let Wire Fraud Give You The Chills

What is Wire Fraud?

Wire fraud is financial fraud using any communications technology or the internet. It can range from phone calls, faxes, emails, texts to social media messaging. Unfortunately, wire fraud can happen to anyone anytime – from the obvious poorly worded text from your bank to the more sophisticated email from what seems to be a legitimate email address. As the use of technology increases, wire fraud is more rampant than ever.

Wire Fraud and the risks

As a homebuyer, you need to be aware of the risks of wire fraud.

Real estate transactions are complex - they involve large sums of money exchanging hands and involve numerous parties. Unfortunately, much of the information scammers need is publicly available online. Along with this, the circumstances of the COVID-19 pandemic caused an increase in digital closing of 225%. The downside is that no safety net was created to reduce the risk of wire fraud. Scammers used this unfortunate situation to their advantage, which increased wire fraud.

Wire Fraud and the statistics

According to the FBI, a cybercrime is reported every 39 seconds, and $10.3 billion was lost in reported cybercrime in 2022 alone. CertifID has found 2,260 real estate wire fraud victims were reported to the U.S. Financial Crimes Enforcement Network in 2021 with a total damage of $893M. As technology advances, so does the risk of wire fraud.

Every stage of the real estate transaction is vulnerable to wire fraud – the buyer’s cash to close, the seller’s net proceeds, and mortgage payoffs are all at risk.

How is your title company protecting you from Wire Fraud?

A good title company will take steps to protect you from wire fraud, and they can do this in many ways. The most important are:

1. Educating clients and professionals about wire fraud
2. Having processes and audits in place to prevent wire fraud.
3. Using third-party tools to provide added security layers.

Educating clients and professionals about Wire Fraud

Did you know that an American Land Title Association (ALTA) study found almost 42% of respondents expressed no worry about theft and wire fraud during their real estate transactions?

As a title company, it is part of our duty to create more urgency around the threat of real estate scams. You can’t protect yourself from something if you don’t know what it is or what it looks like—raising awareness on wire fraud is the fundamental way to prevent it.

Industry professionals can help keep clients safe by:

• Give your clients explicit examples of what wire fraud looks like. Show them what fraudulent emails might look like.
• Create a standard warning about wire fraud scams and build it into the signature line of your email to help raise awareness and continuously educate your clients.
• Be explicit and transparent about your communication practices for every transaction.
• Ensure you call clients immediately before any legitimate wire transfer. This assures the client that the funds are going to the right place and people.
• Refrain from using free Wi-Fi when working on client cases; it's unlikely you will have the same protection as you would in the office or your known Wi-Fi.
• Stress the importance of independently verifying changes in wiring instructions through a trusted communication channel.
• Advocate for the implementation of multi-factor authentication across all relevant accounts.

As a client, make sure you:

• Speak to your real estate agent about what wire fraud is and what it looks like.
• Only send funds after contacting the title company first at a trusted number to confirm the instructions.
• If you are a Seller, do not email your account information; instead, bring the instructions to closing.
• If you receive an email or text asking for information, contact your real estate agent on a trusted number before doing anything else.

With the proper education, real estate agents and clients can work together to have good transactions - free from wire fraud.

Having processes and audits in place to prevent Wire Fraud

Wire transfers and pay-off instructions need clear processes and audits to take place regularly.

A wire transfer policy should include, but is not limited to, the following:

• Detailed procedures for initiating, approving, and executing wire transfers and pay-off instructions.
• Address segregation of duties and include steps employees should take when they are uncomfortable proceeding with a wire transfer or payoff instructions.
• Keep verified wiring instructions on hand with good routing numbers, and always verify every set of payoff instructions.
• All transactions must go through your internal control processes before staff initiate a wire transfer or payoff instructions.

Companies should ensure they are regularly auditing wire transfers.

Audits evaluate internal processes for wiring and detect inadequacies that impact the business and clients. They ensure safeguards are adequate and highlight potential risks and areas of improvement.

It allows companies to address any issues before significant problems arise proactively. Given the instantaneous nature of wire transfers, processes and audits for wire transfers and pay-off instructions must be robust.

Using third-party tools to provide added security layers

The best way your title company protects you from wire fraud is using third-party tools such as Qualia Connect's secure portal and CertifID.

Qualia Connect's secure portal

Qualia Connect is a secure portal designed to stream title and closing processes. It is a portal to communicate with clients, agents, lenders, and borrowers. It brings all parties to the transaction onto one centralized closing platform.

Qualia Connect uses two-factor authentication every time you log in on a new device or access the software on a mobile device. When using two-factor authentication, the portal is more secure than encrypted emails and helps significantly decrease the risk of wire fraud.

CertifID

CertifID is a secure portal where you can submit wire instructions, knowing your information is safe. The software ensures users connect through trusted devices and uses Knowledge-Based Authentication, Two-Factor Authentication, and Bank Account Certification (allowing the account holder to confirm their bank credentials before transferring funds).

This portal eliminates the risk of fraudulent wiring instructions through emails and verifies all mortgage pay-offs. Transactions completed using CertifID add several protection layers, from account verification to added insurance.

Wire Fraud warning signs

There are many warning signs of wire fraud – some more obvious than others. A prime example may be a scammer posing as your real estate agent and convincing you to divert your closing costs to a fraudulent account.

It could be that poorly worded email or that text message from your bank that has come from a number you don’t recognize. However, sometimes, it is not as easy to pick up on. Here are some ‘red’ flags that should make you think twice:

• Incorrect words, spellings, or phrases
• Changes or discrepancies in previously stated procedures
• Mismatches in email addresses, email signatures, or domain names
• Requests for confidential information
• The recipient's bank details are different than those which were previously provided
• Last minute changes – an unexpected email prompting you to make payment urgently.

If you have any doubt, the best thing to do is pick up the phone and call your title company to verify the request or speak to them in person.

Best practice for preventing Wire Fraud - Realtors

As realtors, we must ensure we do our best to prevent our clients from wire fraud. Here are some tips for best practice:

1. Develop a detailed wire transfer policy.
2. Educate and empower your finance staff to be reasonably suspicious.
3. Require two people to execute a wire transfer with the bank.
4. Set up a verification process – use the tool your title company provides you for security.
5. Be smart about online security – don’t use free Wi-Fi regardless of where it is from.
6. Educate your clients – any conversation around money should have explicit warnings and examples of wire fraud. Tell them what they need to look out for, and if there is any doubt – STOP and CALL.

Best practice for preventing Wire Fraud - Clients/Homebuyers

Scammers view homebuyers as easy targets, much like a child views a piece of cake – irresistible. Educate yourself on wire fraud and what it looks like.

The first thing you need to do when you receive a request is just stop. Consider what the request is asking, who it is coming from, and whether the contact details are correct. Even after checking all this, only send money after independently verifying your instructions.

If you think you have been a victim of wire fraud or a wire fraud attempt, it can be terrible and even embarrassing. But rest assured, there is nothing to be embarrassed about – scammers are becoming exceptionally sophisticated. Here are the steps you need to take to report and attempt to recover your money:

1. Contact your bank and have a fraud alert sent to the bank that received your wire to place a freeze on the account.
2. File a complaint with the FBI’s Internet Crime Complaint Center (IC3).
3. Contact your local FBI field office and provide the IC3 complaint number.
4. Contact local law enforcement.
5. Contact your realtor.