Wire Fraud: An Alarming Trend
WIRE FRAUD: PROTECT YOURSELF
Closing Attorneys have seen an unnerving surge in attempted fraudulent activity. WRAL and other media outlets have reported on instances where fraudsters have successfully stolen money from buyers and sellers of real property (see link for WRAL report http://www.wral.com/real-estate-scam/15679909/). Despite the recent rise in media reports, buyers, sellers and, unfortunately, many real estate professionals, are still unaware of how prevalent this fraudulent activity has become.
The attempted fraud typically begins with a compromised email address. In MWH’s experience, the compromised email address typically belongs to a real estate agent, the Buyer or the Seller. The bad guys use a phishing scheme (see link for the Federal Trade Commission’s web page dedicated to “Phishing” https://www.consumer.ftc.gov/articles/0003-phishing) to gain access to the email account. Once they get in, the bad guys can see the entire closing timeline unfold in real time. The fraudsters gain access to schedules, closing timelines, contact information . . . everything.
The bad guys will then disguise themselves as someone from the closing attorney’s office, a real estate agent, or an employee of the mortgage lender. The bad guy, now cleverly disguised as someone you already know and trust, will contact you with phony wiring instructions stating that you need to wire your down payment or funds to close ASAP. They will provide you fraudulent wiring instructions. They will do their best to rush you through the wiring process. They may even contact you via phone or text. Without further due diligence, many Buyers have been tricked into sending their hard-earned down payments to the bad guys. And, once funds have been wired, they are nearly impossible to get back.
The bad guys may try to communicate with your closing attorney as well, pretending to be you or someone who represents you. The bad guys will try to send MWH phony wiring instructions. The bad guys want MWH to use their phony wiring instructions to send Seller proceeds from closing to them.
HOW DOES MWH PREVENT FRAUD?
Over the past several years, MWH has taken a number of steps to prevent fraud.
First, all four of our offices utilize Kaspersky software to filter out phishing schemes and protect our servers, computers and interoffice networks from infiltration by malware.
When we communicate with you about wiring funds, we will do so via Citrix Sharefile. This platform allows to send you attachments, typically wiring instructions, via email as a secure attachment, reducing the risk that a bad guy will intercept. MWH also has the ability to create a secure web portal via our website (www.mwhlaw.lawyer) for the transmission of sensitive information.
For real estate professionals that we deal with routinely, MWH has hand delivered a copy of our wiring instructions. By doing this, MWH knows that most of the real estate agents and mortgage lenders we deal with on a routine basis already have our confirmed wiring instructions on hand.
Soon after a closing is set up with one of our four offices, MWH staff will reach out to our Sellers and ask if Seller proceeds will need to be wired after closing. If so, we will require a notarized document be completed and returned to our office with complete wiring instructions. Since this is done at the beginning of the process and requires a Notary Public to witness, MWH has found this helps prevent bad guys from trying to intervene later in the transaction.
To further prevent a bad guy from perpetrating a fraud, MWH’s trust account is reconciled twice daily. MWH also makes use of banking services such as positive pay to prevent potentially fraudulent items from clearing.
WHAT CAN YOU DO TO PREVENT FRAUD?
If you are a Buyer and need to wire funds in advance of closing, it is imperative that you confirm the wiring instructions you have been given with the closing attorney. If you are wiring funds to a law firm, call the law firm using a phone number you know to be correct.
If you are a Seller, follow the closing attorney’s written instructions as to what they require to wire your sales proceeds to you. If you fail to follow their instructions exactly, the closing attorney may refuse to wire proceeds to you. Instead, your funds will be made available to you in check form.
Be vigilant. If someone contacts you that you have not met or talked to previously, be suspicious. If the email is from someone you trust, look for changes in tone, grammar, and spelling. Bad guys are not typically English majors.
If you have any concerns, make an appointment to meet the closing attorney in person to exchange sensitive information. The bad guys usually assume you will not have met your closing attorney in person and will be communicating with the closing attorney predominantly via email.
-Joshua M. Whitaker, Attorney