Stay alert to these red flags in the titling and settlement process to protect yourself and your clients from fraud.

According to the latest FBI Internet Crime Compliant Center’s report, in 2021, losses from cybercrime in the real estate/rental category reached $350,328,166. The total amount of losses reported for internet crime was $6.9 billion!

One place where real estate fraud can occur is during the title/settlement process. “Good Morning America” recently covered this topic to discuss how big this has become. The piece was titled “New warning about rise in home-buying scams.”

Wire transfer fraud is a major issue, and the internet has played a crucial role. In this type of fraud, the fraudster intercepts outgoing or incoming wires to a different account and, in many cases, bank accounts in different countries.

You have seen the news stories about fraudsters acting as real estate agents, lenders, title companies, and even borrowers and sellers. During a legitim-ate transaction, the fraudster “takes over” the identity of one of these legitimate nonfraudster parties and provides bad wire information by changing wire instructions (usually at the last minute) that redirect the funds elsewhere.

These fraudsters typically hack someone’s email and watch communications between the parties. Then they wait until the time of the closing and make their move. For example, they pretend to be the title company and use a forged/hacked email that looks legitimate. The fraudster comes up with a reason about why wiring instructions need to be changed. The buyer doesn’t verify this information with the person they have been working with and follows the new instructions, sending the money to the fraudster. In a flash, the money is gone. Time is of the essence to report missing funds, but in many cases, the fraud is not noticed immediately and the money is gone.

With today’s technology, fraudsters can obtain access to emails, hijack company logos and signature lines, and even set up phone numbers using a person’s name—all in an effort to sound legitimate. They go to great lengths to deceive you. Many work in large gangs, both domestically and internationally.

Phishing fraud occurs when a fraudster uses email, text, phone calls, or other methods to try to obtain banking details. This type of fraud often overlaps with other types of fraud like wire fraud.

Preventative Measures

As fraud becomes more prevalent, here are some things you can do to help yourself and your clients.

Use a secure platform. Make sure you or your title and settlement partner use one of the several secured wire platforms that are available. These provide client wire information to the settlement company through a secure portal that is connected to most U.S. banks. These digital identity and device verification services are used by title companies, law firms, lenders, realtors, and homebuyers and sellers to prevent wire fraud. The technology uses enhanced features to verify the account holder matches the bank account information. Most come with large direct insurance coverage for your transactions.

Confirm wire instructions with your clients. Be sure to confirm wire instructions with your clients by phone, not email! Many victims of wire fraud have been compromised through email. Educate clients that if they are notified by email that something has “changed” right before closing, it can be a red flag. Advise them to call the person (the closer) they have been working with to verify the details.

Instruct your clients to be alert to the use of odd or slightly misspelled words in any emails they receive. For instance, “Miche11e” may be spelled with the number 1 instead of the letter “l.”

Remind clients to check emails and their URL addresses. It can be hard to spot discrepancies on mobile phone screens. Although mobile phones are convenient, the screen sizes are small, making it possible to miss something that would have been spotted on a laptop or computer screen.

Verify the wiring process with your vendors. Be sure you and your client know what the proper process is. Always be sure to call first and verify the process. Let your borrower know when they should expect funds to be received in their account and that you (or the title company) will call when the wire has been initiated. Conversely, if a borrower is wiring a down payment, you—as the lender—should be in contact to confirm these details and educate the borrower on why they are necessary, because the borrower is unlikely to know best practices in this area. Share with current and potential clients that a lender will never request or send wire information by email due to the risk of the account being hacked or compromised. Any such request or sending of information by email is likely a scam.

Make sure you always ask for and receive your Federal Wire Reference Number. This reference number is a unique identifier assigned to the federal government through the financial institution that can be used to tract and investigate the wire from the initiating bank to the receiving bank. This number is critical should you need to trace a missing wire and help retrieve your funds. Remember, this number can be generated only by the federal government and when a wire is placed in the wire system.Your title and settlement provider can provide you with this number.

When dealing with non-U.S. citizens/foreign nationals, many title and settlement companies may insist on having funds leave or be received by a bank located on U.S. soil. This request is not necessarily a red flag; however, have clients check with the settlement provider to see what, if any, specific procedure needs to be followed. This request may also be a requirement of the title underwriter.

Proactively communicate from the beginning of the transaction, so everyone understands each step of the process and there are no delays in closing as a result of misunderstandings.

If you or your client are victims of wire fraud, notify the bank immediately! The bank needs to know as soon as possible so they can attempt to recall the wire. This is also known as a SWIFT recall. They will need the Federal Wire Reference Number. Also report the issue to the Federal Trade Commission at www.ReportFraud.ftc.gov and to the FBI Internet Crime Complaint Center at www.ic3.gov/Home/ComplaintChoice.

The Louder, the Better!

Wire fraud may seem like a shameful event, so sometimes we keep the story and the warnings to ourselves. We pretend it did not happen and live with the guilt of being a victim.

Fraudsters know this and thrive on us keeping silent as they continue to prey on more innocent people. They make a career out of this.

If you or your client are victims of wire fraud, get your story out, listen to others, share their stories too, and learn from their mistakes. When it comes to money, do not be afraid to ask questions.

Tell your clients that if something feels odd, question it. In real estate transactions, there are many key players—realtors, loan officers, processors, escrow officers, settlement agents, title agents, etc.—that can answer questions.

The more we all talk about this subject, the more we make others aware of the red flags!