Beware of Wire Fraud in Connection with Real Estate Transactions
As con artists become more sophisticated and tech savvy, parties involved in real estate closings, including buyers, sellers, realtors and closing attorneys, are regularly being targeted with wire fraud scams. Most recently, the scams have focused on hacking into e-mail accounts of the parties involved in the transaction. Con artists can gain unauthorized access to third-party e-mail accounts when just one party involved in the transaction fails to utilize e-mail encryption software.
Assume that the buyer, buyer’s realtor, seller’s realtor, buyer’s attorney and the seller’s attorney are all involved in an e-mail chain concerning the particulars of the closing. These emails would likely include sensitive information, such as wiring information, closing figures depicted on the settlement statement, and names/contact information for all parties involved. Now assume that just one of the parties involved in this e-mail chain failed to use encryption software to protect the e-mail from interception. With the assistance of readily available computer software, a con artist can easily intercept the entire chain of emails from any individual who replies to or forwards an email without using encryption software. Now the criminals have everything they need to engage in wire fraud.
There are many variations of the scam, but the two most common involve the criminal intercepting e-mails and then sending a fake email (i) to the buyer posing as the closing attorney and requesting that the buyer wire his purchase funds to the criminal’s bank account, or (ii) to the closing attorney posing as the seller and requesting that the closing attorney wire the seller’s proceeds to the criminal’s bank account. In both cases, the money is either wired to a bank located in another county, or it is wired to a bank located in the United States at which point the criminal immediately withdraws the funds and wires them to a bank located in a foreign country. In either case, the funds are usually beyond the reach of the banks or the FBI well before the scam is discovered.
Countless individuals and law firms have fallen victim to these scams, which have resulted in the victims going bankrupt and law firms and real estate companies going out of business. If you are an attorney, realtor or other professional involved in the real estate closing, and one of these scams succeeds due to your failure to utilize encrypted email, you can expect for the victim to look to you for reimbursement.
If you are involved in a real estate purchase, you should take steps to ensure that you don’t become a victim of wire fraud by verifying that you and the professionals representing you are using encrypted emails software. If you receive wiring instructions, call your closing attorney at a number that you know to be valid (not the number included on the e-mail that may have come from the con artist) in order to verify the wiring instructions.
By: Aaron D. Arnette