Remember when wire fraud was just about bogus emails?
Criminals today have broadened their tools and tactics in their quest to divert escrow funds by tricking us and others in the real estate transaction into accepting falsified wiring instructions.
Email is no longer their only weapon. We’re hearing about two non-email tactics fraudsters are using.
Matching the payee name on wire transfer with name on payee’s destination bank account can help prevent wire fraud
Wire fraud is a HUGE problem that only keeps getting bigger and bigger.
In fact, U.S. Representative Randy Hultgren (R-III) wrote a letter to Fed Chairman Jerome Powell on June 29th urging the Fed to be more proactive in regard to wire fraud and real estate transactions.
The letter referenced the United Kingdom’s system of matching payees’ names as a possible solution to the problem of wire fraud. However, we don’t have to wait until a federal law is passed that orders banks to match the payee name on the wire transfer payment to name on the payee’s destination bank account (“Beneficiary Bank”).
As title and escrow agents, we can be proactive and in partnership with the banks with which we do business.
So what can we do right now?
We can know what our Bank Agreement says with our escrow account bank (the “Receiving Bank”).
Does the Bank Agreement say that the Receiving Bank will check the payee’s name with the name on the destination account when a wire fund transfer is initiated?
Or, does it say that the Receiving Bank need only rely upon the account number it was provided in the wiring instructions order?
The answers to these questions might lead to an opportunity to have a discussion with your partnering Receiving Bank.
We can send the wire instructions on the payment order, with explicit directions that acceptance be restricted to match the designated payee’s name on the Beneficiary Bank account. If it doesn’t match, then do not send the funds.
Lastly, if something does go wrong despite our best efforts and precautions, then notify both the Beneficiary Bank and the Receiving Bank as soon as possible.
Typically, banks require notification of an unauthorized transfer or error within a defined time period such as, for example, 30 or 60 days.
Aside from any contractual or legal requirement for early notification, the sooner the problem is communicated, the greater the odds of the bank being able to halt or pull back the wire funds transfer. For a great explanation of how a wire fund transfer works behind the scenes, view “Funds Transfer Law and Unauthorized Payment Liability.”
The title and settlement industry is blessed with great people, and that makes sense because our industry is built on being helpful.
We all want a smooth, efficient transaction for everyone involved. Unfortunately, our desire to be helpful and to keep things moving makes us a prime target for wire fraud.
So, how careful do we need to be when verifying the legitimacy of an email or even an incoming phone call?
Fraudsters know about us. They know how busy we can be, and they know how to prey on our traits to overcome our data and escrow security training.
They aren’t just looking to trick us. They aren’t practical jokers. They are truly insidious “social engineers.”
A few weeks ago, I wrote a post likening email escrow fraud to Whac-A-Mole. I’d like to revisit that image for a moment.
A few years ago, scammers figured out what our industry does. Admittedly, it took them a while, but when they did, many agents started seeing a barrage of fraudulent emails. Title agents responded by tightening down on their policies and procedures.
The “mole,” however, always manages to find a weak spot where he can pop his head out of the ground. In our case, that weak spot is clearly the consumer.
Ah, the consumer…