(It’s a lot to say – SupercaliFRAUDulisticexpialidocious)
Email can be sinister. It can encourage changes (not
authorized, not legitimate), it can “warn” recipients of dire
circumstances if instructions are not followed, it can be shaped and branded to
look like an institution all parties are familiar with, and it can assist in
fraud that involves any number of untoward outcomes – like clients’ and
institutions’ funds being pilfered.
The U.S. Government has a
phrase for such criminal action: Business Email Compromise/Email Account
Compromise (BEC/EAC). That wordy title speaks to two crimes.
BEC scams are carried out by compromising legitimate business email accounts. The EAC component of the scam refers to the targeting of consumers and the lenders, real estate professionals, attorneys and others who serve them.
It can be daunting to try
to wrap one’s brain around every single possibility and scenario that could
trip someone up – and trick someone into giving away information that affords a
thief the opportunity to steal funds.
Below is a list that,
while not necessarily “completely memorizable” – even if studied, can
serve as a red flag for knowing when something is awry.
It can serve as warning to
be wary of the many and various paths that crooks can take to defraud
legitimate people conducting real estate transactions.
Exercise extreme caution when weighing any
request to change wire instructions. Encourage all parties to do the same.
Be wary of any email, phone call or other
communication that involves threats, high pressure language (e.g. markings,
assertions, or language designating the transaction request as “Urgent,”
“Secret,” or “Confidential,”) or warns of “dire consequences” if immediate
action isn’t taken.
Be wary of emails with missing or unusual
subject lines.
Be wary of any request to change wiring
instructions, especially any last-minute requests.
Be wary of emails that include poor spelling or
grammar, are overly formal or that are written in a style uncharacteristic of
the purported sender. Also, beware of emails that misuse industry terminology,
for instance, references to the “HUD” instead of the “Closing Disclosure”.
Be wary of any unexpected emails or requests,
including internal requests purportedly from executives or others.
Be wary of emails sent at odd hours.
Be wary of any communication seeking to confirm
information the purported sender should already have.
Beware of sudden changes in business practices.
For example, if a current business contact suddenly asks to be contacted via a
personal email address, it’s best to verify the legitimacy of the request via
other channels.
Review monthly escrow statements from the
Receiving Bank (the one holding the agent’s escrow account) as soon as
available to verify that all expected funds have actually been received.
Have a written agreement in place with the
Receiving Bank (the agent’s bank which holds the escrow account and receives
the agent’s payment order) that the Receiving Bank will match all names,
addresses, account numbers, routing number and beneficiary bank name on the
payment order with where and to whom the funds are actually sent. Or put
instructions on the payment order for the Receiving Bank to verify
authorization by matching all of this information.
Emailed transaction instructions directing wire
transfers to a foreign bank account that has been documented in customer
complaints as the destination of fraudulent transactions.
Emailed transaction instructions directing
payment to a beneficiary with which the customer has no payment history or
documented business relationship, and the payment is in an amount similar to or
in excess of payments sent to beneficiaries whom the customer has historically
paid.
Emailed transaction instructions delivered in a
way that would give the financial institution limited time or opportunity to
confirm the authenticity of the requested transaction.
Emailed transaction instructions originating
from a customer’s employee who is a newly authorized person on the account or
is an authorized person who has not previously sent wire transfer instructions.
A customer’s employee or representative emailing
financial institution transaction instructions on behalf of the customer that
are based exclusively on email communications originating from executives,
attorneys, or their designees when the customer’s employee or representative
indicates he/she has been unable to verify the transactions with such
executives, attorneys, or designees.
A customer emailing transaction requests for
additional payments immediately following a successful payment to an account
not previously used by the customer to pay its suppliers/vendors. Such behavior
may be consistent with a criminal attempting to issue additional unauthorized
payments upon learning that a fraudulent payment was successful.
Review and revisit this list of tips when
handling suspicious wire requests, before the exchange of funds takes place.
Verify all wire instructions with an alternate
method of communication.
Check emails to ensure the sender’s address has
not been altered. Fraudsters typically use email addresses that closely
resemble a seller’s (or any party’s) actual email address.
Do not open unknown or unverified hyperlinks or
downloads. Tip: Hovering your mouse over the sender’s email address may reveal
a different email address. Caution: Do not hover over unknown links within the
body of a suspect email. Security experts formerly recommended hovering as a
way to determine the validity of such links. However, newer strains of malware
may infect a computer when the user merely hovers over the link.
Delete unsolicited emails from unknown sources.
In the case of an invoice, verify any changes
in vendor payment location and confirm requests for transfer of funds.
Every year the U.S. government comes out with a growing
list of warnings on cyber fraud, real estate fraud, email fraud – the list goes
on.
Some warnings are common sense: delete suspicious-looking
emails, don’t give away banking information or social security numbers, never
wire anyone money without triple checking – and then checking again.
We’re committed to ensuring that all independent agents
have every new (and standard) information source available, even as the rules
and the threats multiply and expand almost every month.
In this first installment of a multi-part series on Flagging
Fraud, we take a look at some of the red flags involving parties to a real
estate transaction.
Red
Flags
Learn or at least become familiar with red flags that could
well indicate something is awry in any real estate transaction.
Some title fraud may be detected by agents before the
transaction closes.
Rather than memorize, regularly reviewing this list will
help you and all those involved in your transactions be aware of potential
fraudulent components:
Releases
of prior mortgages recorded before or independently of the closing of a new
loan with no source of payoff funds.
Many
recent transactions and/or re-recordings.
Recent
change in title, especially one without concurrent financing.
Releases
recorded out of sequence.
Sale
of property subsequent to or concurrent with a divorce.
Quitclaim
deeds with no consideration.
“Intra-family”
deeds.
Parties
to the transaction are affiliated.
Document
not prepared by an attorney or title company.
Document looks non-standard.
Power of attorney with Grantee signing as
Attorney-in-Fact.
Prior signatures indicate failing health or
physical deterioration followed by a healthy, strong signature.
Bargain purchases—policy amount much higher
than purchase price.
New mortgage amount much higher than purchase
price.
Property seller is an LLC/entity/corporation.
Appraisal looks questionable (e.g. indicates
recent sale/listing activity at significantly lower price; comparable sales are
previously flipped properties).
Despite the
rising threat, recent survey results show a surprisingly small number of agents
are prepared, as most do not have a written cyber security and response plan.
A
cyberattack is a malicious and deliberate attempt by and individual or an
organization to breach the information system of another individual or company,
seeking benefit from the disruption, ransom, or theft of data – and such
attacks are increasing in numbers and complexity.
Despite the
rising threat, recent survey results show a surprisingly small number of agents
are prepared, as most do not have a written cyber security and response plan.
A written
cyber security and response plan is essential to be prepared, organized and to
execute appropriate and prompt actions when an attack occurs.
The plan
does not need to be complex. To be effective, it should be simple and clear and
present key information. It should also be built commensurate with the size of
the organization.
Key
elements of the plan must include:
Perform a risk analysis to mitigate all risks, covering administrative, technical, and physical controls. Simply put, this is what could be vulnerable, what could go wrong and what is or should be done to try to avoid or contain the threat(s).
The cybersecurity program must protect the security and confidentiality of nonpublic information, protect against threats or hazards to the security or integrity of information, and protect against unauthorized access.
Define a schedule for the retention of data and a mechanism for its secure destruction when data is no longer required.
Designate an individual, third party, or affiliate who is responsible for the information security program.
Be sure existing controls in place – access controls, authentication controls, and physical controls to prevent access to nonpublic information. Encryption (or an alternative, equivalent measure) should be in place to secure data stored on portable electronic devices and for data transmitted over an external network.
Identify and manage devices that connect to the network – a simple inventory.
Adopt secure development practices for in-house applications if applicable. Alternatively, obtain this assurance from your service provider that performs the development for you.
Use multi-factor authentication to prevent unauthorized accessing of nonpublic information.
Regularly test and monitor systems for actual and attempted attacks, maintain audit trails, and implement measures to prevent the unauthorized destruction or loss of nonpublic information.
Keep up-to-date on emerging threats and vulnerabilities and provide ongoing training to employees to be sure they understand existing controls and why they are important; employees must know how to recognize and report threats.
The
response plan must include the following elements to be effective:
Date of the cybersecurity event.
A description of how the information
was exposed, lost, stolen, or breached,
including the specific roles and responsibilities of third-party service
providers, if any.
How the cybersecurity event was
discovered.
Whether any lost, stolen, or breached
information has been recovered and if so, how this was done.
The identity of the source of the
cybersecurity event.
Whether you filed a police report or
notified any regulatory, governmental or law enforcement agency and, if so,
when such notification was provided and by whom.
A description of the specific types
of information acquired without authorization, which means particular data
elements including, for example, types of financial information, or types of
information allowing identification of the consumer.
Time period during which the
information system was compromised by the cybersecurity event.
The number of total consumers
affected by the cybersecurity event, or a best estimate.
The results of any internal review
identifying a lapse in either automated controls or internal procedures, or
confirming that all automated controls or internal procedures were followed.
A description of efforts being
undertaken to remediate the situation which permitted the cybersecurity event
to occur.
Don’t wait until an event occurs. It’s a chaotic time full of financial
and emotional high stress. Do it now and provide yourself the peace of knowing
you are prepared.
A national survey of title agents conducted by the American Land Title Association shows that our industry has farther to go when it comes to formalizing cyber and escrow security plans.
Results of the survey also hint that the threat landscape is
becoming increasingly perilous for title agents, consumers and others involved in real estate transactions.
Of the survey’s more than 750 respondents, 63 percent said the number of cybercrime attempts targeting their company increased between 2017 and 2018.
Roughly one-third of respondents also observed increases in fraud attempts targeting buyers, sellers and real estate agents over the same period.
Many title agencies have sought to combat the worsening cyber and escrow fraud threat by means of employee awareness.
More than half of respondents said their company reminds employees about the need to remain vigilant on about a weekly basis. More than 25 percent said those employee reminders are made on a monthly basis.
However, more than 20 percent of respondents reported that their company offers no training at all on cybercrime trends or red flags.
More troubling, however, is that despite the apparent increase in fraud attempts, just 62 percent of respondents said their company has a written cybercrime response plan.
Smaller agencies — those with gross annual income below $1 million — were also somewhat less likely to have formal cyber response plans, wire retrieval plans or training programs than were larger agencies.
Survey results also show that cybercrime insurance coverage among title agents of all sizes is not as prevalent as one might expect given the apparent increase in fraud attempts. More than 27 percent of respondents said their company does not currently have a cybercrime insurance policy.
While most industry participants have made strides when it comes to protecting escrow funds and sensitive information, the survey clearly shows that gaps remain.
The survey also provides an opportunity for all of us to redouble our efforts, particularly when it comes to formalizing cyber response plans.
To help, we’ll be posting a blog series in the coming weeks that will provide simple, actionable tips for improving and formalizing response plans, as well as plans for wire retrieval and staff training.
We’ll also talk about the importance of cyber insurance and provide insight on how to get the right coverages for your business.
In the meantime, check out the growing library of cyber fraud resources on the Alliant National Education page. Alliant National agents can also watch our brand new Texas Continuing Education webinar on information and escrow security.
Cyber insurance is now critical to help protect your business.
Cyber attacks are becoming
more frequent, clever and complex. Cyber insurance is now critical
to help protect your business from major expenses, business loss, and
regulatory fines and penalties.
General liability umbrella policies typically do not cover
cyber events (Target’s insurance policy only covered
36 percent of its $252 million data breach costs).
This insurance comes in many different variations and
costs, so it is important to know what product works best for you, considering
and balancing coverage and cost.
Four key elements comprise essential coverage to protect
against data breach and loss of customer data:
E&O
Liability
Network
Security
Privacy
What is most important is that both cyber-crimes and
liability are included in your coverage.
The policy may be a standalone, or a rider on to your
existing policy. Always buy the most
compressive coverage available that you can afford.
Here is why that is so important:
Broad coverage includes both first and third-party
coverage. First party only covers your business, while third party will cover
the claims against you from customers or clients as well as related damages and
court costs.
The below comparisons show why you need both cyber-crimes and cyber liability coverage:
Event
Liability Coverage
Crime Coverage
Loss of funds (escrow and operational,
personal) due to social engineering and electronic fraud or theft
No
Yes
Fraudulent electronic transfer or
divergence of funds
No
Yes
Employee electronic theft
No
Yes
Forgery
No
Yes
Cyber extortion (ransomware)
No
Yes
Data breach expenses including legal
costs, fines or penalties
Yes
No
Loss of assets and loss of business
income
Yes
No
Recovery of systems and forensics;
reputational damages
Yes
No
Economic damages through network
security failure or failure of privacy controls
Yes
No
Consult with your insurance carrier for specific coverage
offerings and cost and weigh the decision that is right for your business and
budget.
Remember, the
broadest form of coverage will best protect you and your business so while it
may be more expensive, your business will be better protected against the risks
we face in today’s business environment.
