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Escrow fraud remains low-risk, high-reward for criminals

Several months ago, title agents across the country observed an uptick in attempted escrow fraud. In many cases, fraudsters posed as other participants in the transaction and attempted to trick agents into wiring funds to fraudulent accounts. The vast bulk of these escrow fraud attempts involved bogus emails. The stories and dollar losses were startling, and the industry responded. Alliant National produced a comprehensive alert for its agents discussing the threat. The American Land Title Association (ALTA), Consumer Financial Protection Bureau, Federal Trade Commission and others issued various alerts for consumers. Since then, many agents have implemented policies around verification of wire instructions, and some have established retrieval plans in case a wire is diverted. Agents also have started discussing email and escrow security with consumers and real estate agents. The escrow fraud stories seemed to have quieted down a little recently. So, have we “whacked the mole” when it comes to escrow fraud? Probably not. The reason is simple. Escrow fraud is still a low-risk and high-reward strategy, particularly for criminals overseas. During a recent data security hearing before the U.S. House Financial Institutions Subcommittee, Daniel Mennenoh, ALTA’s immediate past president, noted that the average wire fraud loss is just under $130,000. On the other hand, the average successful bank robbery nets just $3,800. For a fraudster, the choice between holding up a bank and raking in 30 times as much money while sitting in front of your computer in your jammies seems pretty clear. Email-involved escrow fraud is part of a larger fraud threat targeting businesses of all sizes and the general public. The FBI refers to this threat as Business Email Compromise/Email Account Compromise (BEC/EAC). According to the FBI’s Internet Crime Complaint Center (IC3), BEC/EAC scams have been reported by businesses and victims in all 50 states and in 131 countries. IC3 data indicates fraudsters stole or attempted to steal more than $1.59 billion from roughly 22,000 U.S. victims between October 2013 and December 2016. Fraudulent transfers have been sent to 103 countries with the majority going to Asian banks located in China and Hong Kong. IC3 saw a 480% increase in the number of complaints in 2016 filed by title companies that were the primary targets of BEC/EAC scams. Those are big numbers, and they remind us that this problem isn’t going away. Fraudsters are going to keep trying to think up ways to get us to ignore our training and wire out money to fraudulent accounts, so we must remain vigilant in that regard. However, the escrow fraud “mole” is already rearing his ugly little head someplace else. Fraudsters are coming directly after consumers, and that’s a very difficult “mole hole” to guard. Staying on top of the escrow fraud threat isn’t going to be easy, but we in the title and settlement industry are uniquely positioned to help consumers and others keep escrow funds secure. Alliant National recently produced a white paper as part of our ongoing effort to inform agents about the threats we all face. The paper also provides real-life tips and strategies for preventing, detecting, and responding to BEC/EAC escrow fraud. I’ll be back next week with a post exploring some of the most common types of escrow fraud schemes. Until then, feel free to download our white paper, and let’s all whack that mole! ]]>

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Nathan Marinchick

Alliant National's director of research + educational programming

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This blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on this blog.

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