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Buying a home should be a joyous and exciting experience. However, the very nature of the transaction – large amounts of money transferring between parties – has become a prime target for fraudsters.
Over the last few years, there have been increasing reports from financial institutions and home buyers concerning wire transfer fraud connected to real estate closings. According to a warning issued by the Federal Bureau of Investigation, the number of fraudulent wire transfer scams reported by title companies and closing agents to the FBI's Internet Crime Complaint Center increased by 480 percent in 2016. In 2017, the FBI reportedly received in excess of 300,000 complaints and the total losses exceeded $1.4 billion.
Here’s how the fraud works:
- A fraudster hacks into a title company or lender’s email server or computer system to search for upcoming real estate closings.
- The fraudster then emails the buyer or financial institution with bogus wire-transfer instructions related to a particular real estate loan closing.
- The buyer or financial institution then follows the bogus instructions to generate the wire transfer request. Once the funds are sent, the fraudster moves on.
Unfortunately, this fraud is usually only discovered when the title company or closing agent informs the buyer or financial institution that they did not received the anticipated funds. To further complicate matters, reports indicate that some hackers have been able to intercept emailed transfer instructions, obtain account information and, by altering some of the data, redirect the funds to a different account.
The result – the money is gone, the deal to purchase the home falls apart and the buyer is left with little recourse.
How to Protect Yourself against Wire Transfer Fraud
- Never wire money based on an email without verifying the transaction over the phone with your attorney or title company first.
- Call the phone numbers you already have with your contacts, not phone numbers sent via email that could belong to a scammer.
- Beware of an email that gives you instructions that differ in any way from the ones you have already discussed.
- Always verify the transaction with a known contact by phone before wiring the money.
- Speak with the title company and verify with them the bank where the money is going, the dollar amount and most importantly, the account number.
- Use communication methods that are secure or methods that do not use email.
- Follow up with your contact afterward.
- If you believe you have been scammed, contact the FBI Internet Crime Complaint Center within 72 hours. https://www.ic3.gov/default.aspx
- You can ask if you can use a cashier’s check at closing rather than a wire transfer.
Buying a home is an exciting time. By taking these cautious measures, you can ensure that the process remains safe and secure.
Additional information on the topic can be found at:
https://www.ncua.gov/newsroom/ncua-report/2018/wire-transfer-scams-involving-real-estate-transactions-are-increasing
https://www.forbes.com/sites/kerrizane/2018/04/16/the-shocking-new-scam-you-need-to-know-about-money-transfers/#5d5399b51c56
https://www.bankinfosecurity.com/blogs/fbis-rat-blocking-fraudulent-wire-transfers-p-2740
