Beware of Wire Fraud

As everyone knows, fraud in connection with real estate transactions is becoming much more prevalent.  The most common, and effective, schemes we have seen involve the interception of wire transfers. The fraudsters intercept wire instructions and change the information contained therein, thus causing the funds to be delivered to the fraudster’s account, rather than the correct account. In some cases, the hack is performed so seamlessly that the ultimate recipient of the wire instructions has little or no indication that the wire instructions have been altered.

Two recent instances underscore the need for extreme caution when handling wire instructions.  In each instance, a real estate agent was either asked (or took it upon themselves) to forward an escrow agent’s wire instructions to their buyers. In each instance, the instructions were not password protected, and as a result, they were intercepted and altered. Their unsuspecting buyers delivered their rather significant escrow deposits to the wrong account. In both cases, the buyers sought legal recourse against the agent.

What can you do to protect yourself? The good news is that the answer is very simple.  Never, ever forward wire instructions for or on behalf of an escrow or closing agent. EVER. You should always insist that your escrow or closing agent forward their wire instructions directly to the buyer. We know that many agents may find this to be a delegation of their duties as a good real estate professional. It is not.  You are not doing your clients any favors by furnishing wire instructions that have been hacked. You should always require the closing/escrow agent to provide password protected wire instructions.  The same is true with regard to the wire instructions for a seller who is due to receive funds from a closing. You can always advise them to make sure they are sending their instructions using a secure protocol, but do not get in the middle and forward the seller’s wire instructions to the closing agent.  Again, you are just asking for trouble.

Do not be the next agent to get sued by a buyer or seller for the negligent handling of wire instructions. In this day and age, it is just too risky.  Instead, you should insist that the closing agent do their job by delivering their wire instructions to your client directly and securely.

As always, should you have any questions, please contact your real estate attorney.

 

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Evan Berlin, Esq.  eberlin@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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