Wire fraud in real estate has reached epidemic levels in recent years. Tech savvy thieves are reviving old fraud schemes to steal millions of dollars from unsuspecting parties in real estate transactions. Losses from wire fraud in real estate transactions exceeded $56 million in 2017, and authorities expect losses to increase in coming years. Cybercriminals continually change their techniques to avoid detection, and work around cybersecurity measures aimed at reducing wire fraud. Unless and until the real estate industry adopts new, more secure methods for transferring funds in connection with real estate transactions, wire fraud will remain the ugly elephant in the room at real estate closings.
Cyber criminals use email correspondence and phone calls
to impersonate one party in real estate transaction to trick another party to
the same transaction into using fraudulent wire instructions. The criminals
pose as a trustworthy source (an attorney, a real estate agent, title company representative,
etc.) to create the appearance of authenticity, legitimacy, and security. Usually,
the party on the receiving end of the email or phone call is planning on wiring
funds for an upcoming real estate purchase or sale. Because the instructions
are somewhat expected and appear to be from a trusted source in the normal
course of a real estate transaction, the unsuspecting party usually accepts the
instructions at face value and initiates the wire transfer. By the time the ruse
is uncovered, it is often too late to secure the return of any or all funds.
Parties to a real estate transaction can reduce the risk
of falling victim to wire fraud by employing a few simple, time-tested means of
independent authentication and verification prior to initiating a wire
transfer. A party to a real estate transaction should only accept wire
instructions that flow directly from a request initiated by that party. Title
companies and brokerages do not send wire instructions unless requested to do
so. A request for wire instruction should always start with a phone call to the
company who will ultimately receive the funds. The telephone number for the
receiving company should be independently verified. Most reputable real
estate-related companies have telephone numbers listed on their website, and
are included in telephone directories. A Secure delivery method, like fax or
encrypted email, should be used to transmit wire instructions. Even with secure delivery, wire instructions
should always be verified over the phone with the receiving company prior to
initiating a wire. Companies rarely change their wire instructions during the
course of a transaction. So, if any new wire instructions are received after
verbal confirmation, they should be independently verified with the receiving
company before any funds are wired through. After initiating a wire, the
receiving company should be informed of the pending wire, and confirmation of
receipt by phone should be requested.
If you suspect that you have been the victim of wire
fraud, contact your bank, the receiving company, and the appropriate authorities
as soon as possible. Every minute counts when it comes to wire fraud
For any questions regarding any or all real estate matters, you can contact Kevin Mitrick at 312-332-7555 or kmitrick@lavellelaw.com.
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