Window to the Law: How to Avoid Wire Fraud in Transactions
Watch this month’s Window to the Law video to learn best practices for helping your clients avoid becoming victims of this fraud scheme, including a re-enactment of the hackers who perpetrate wire fraud.
Window to the Law: How to Avoid Wire Fraud in Transactions: Transcript
Welcome to Window to the Law cyber crime special edition. I am Finley Maxson NAR Senior Counsel.
As you know, a devastatingly successful wire fraud scam is impacting real estate transactions across the nation. Here’s how it works:
A hacker breaks into an email account of one of the parties to a transaction, such as a real estate brokerage, title insurer, or attorney. The hacker quietly gathers information and waits patiently until it is time to wire money to the seller. At that time, the hacker moves quickly to send a convincing yet fraudulent email to the prospective buyer instructing her to re-route the funds to a different account using the new instructions provided by the hacker. The email may also be sent to one of the other parties involved in the transaction, such as the real estate professional, who may forward the false wiring instructions to the buyer. The buyer causes the money to be wired using the fraudulent instructions and unfortunately, once the money has been wired, it is often difficult or impossible to retrieve.
One of the first reported cases involving the wire fraud scheme was decided by a Kansas court in 2018. A jury held a listing agent and her broker liable for allegedly forwarding an email with false wire instructions to the buyer which the buyer followed and sent sale proceeds to the fake account. A hacker had sent the false instructions to the listing broker. While the agent claimed that she had not sent the email with the false wire instructions, the jury found in favor of the buyer and entered a verdict of $170k against the listing agent and broker.
You can help your clients avoid falling prey to this scheme by following these risk management tips:
First, inform prospective buyers about this fraud at the outset so they will be on alert. Many brokerages require clients to sign written disclosure forms and they include a warning about this fraud in their email signature blocks.
never send wire instructions via email. Also, instruct clients to double-check wiring instructions via a verified telephone number prior to sending any money.
Monitor your email account for unrecognized activity, as hackers often change settings to automatically forward emails to themselves. And be sure to regularly purge unneeded emails from your account.
Also, never click on links or attachments in unverified emails, as they may deploy malware that helps hackers break into email accounts and computer systems.
Finally, employ strong password practices, such as creating passwords with a combination of letters, numbers, and symbols, and never using the same password for different accounts.
Here a list of additional resources to help avoid wire fraud in your transactions.