Wire Fraud: Warning to Consumers

 Jennifer Lindsley, WRA attorney and director of training  |    August 01, 2022
Wire Fraud

Unfortunately, wire fraud continues to plague the real estate industry and devastate potential homeowners who see earnest money, down payments and, in the worst case, the entire purchase price stolen by criminals who disguise fraudulent wiring instructions in emails and other communications that look legitimate. According to the Federal Bureau of Investigation (FBI) Internet Crime Complaint Center’s 2021 report, losses from real estate-related cybercrimes in 2021 totaled $350,328,166, which is an increase of 64% over the statistics from 2020. 

The scheme remains the same. Hackers find a vulnerability in someone’s electronic communication. Often, that “someone” is a party to the transaction. Once inside that person’s email, the hacker has access to contact information for the parties, the agents involved, lenders and title companies. Armed with that information, the hacker can impersonate anyone from the lender to agents and others and begin feeding fraudulent instructions to the parties. The thief hacks into the compromised email account and obtains sensitive information about the transaction, such as when earnest money is due or when the transaction is set to close. The thief then contacts the buyer — often using an email address that is incredibly close to the agent’s email address or another email address of a professional in the transaction — and sends the buyer wiring instructions to wire money to a fraudulent account. Once the money is sent, there is often very little, if anything, law enforcement can do to retrieve the money or prosecute the thief as these criminals and their accounts are often outside the jurisdiction of state or federal law enforcement. 

While it is frequently the consumers in the transaction who invite vulnerabilities into electronic communications, there are plenty of instances where it was the agent’s email that was compromised, opening the door for the hacker. For that reason, it is extremely important for agents to follow company policies regarding the use of email or other electronic communications such as text with consumers. Often firms have fortified their networks by using encryption, two-factor authentication and other security measures to reduce vulnerabilities in the firm’s systems; but occasionally an agent will go astray of company policy and use personal emails or not add required security measures to their communications, thereby introducing weakness despite the firm’s best efforts to minimize this scenario. 

Given all of this, most real estate agents probably did not envision getting into real estate and think fighting international and sometimes domestic cybercrime would be part of the job description. A real estate agent, though, is in a unique position as a trusted professional working with consumers to be a valuable line of defense to thwarting wire fraud by educating consumers. Educating consumers means not only alerting them to the existence of wire fraud but also suggesting steps to the consumer to reduce the risks of wire fraud. To assist agents in that endeavor, the WRA has created a Wire Fraud Warning form for agents to use with consumers to help educate them about wire fraud and to provide instructions about what not to do and what to do when wiring money in a real estate transaction. 

WRA wire fraud warning

The WRA’s Wire Fraud Warning is a one-page educational handout that agents can provide to consumers in a transaction to alert them to the dangers of wire fraud and offer some tips to avoid wire fraud. Some firms and agents may already have their own methods to warn consumers about the risk of wire fraud, and those firms and agents can continue to use those methods. The idea behind creating this form was to give firms and agents that do not already have a system in place to educate consumers about wire fraud an optional tool to use. Additionally, because the instances of wire fraud continue to increase, it seemed timely to bring the issue to the forefront by creating this form. 

How do agents use the form? 

Keeping in mind there is no legal obligation for an agent to warn a consumer about the risk of wire fraud, deciding how, when and whether to warn a consumer about the risks of wire fraud may be decided on a firm-by-firm basis or even a transaction-by-transaction basis. Each transaction is different. An agent may be working with a buyer who is an investor and purchases property on a regular basis such that the buyer is well aware of the risk of wire fraud and knows not to wire money without confirming the instructions beyond some email in the buyer’s inbox. On the other hand, an agent may be working with a first-time homebuyer who is already feeling overwhelmed by the process and might be the one who simply follows instructions for wiring money based on a fraudulent email in the buyer’s inbox that looks to be from a legitimate source. 

If a firm and its agents are choosing to warn consumers about the risk of wire fraud, they should remember that there is a note about wire fraud in all the WB offers to purchase. When an agent is drafting an offer, the agent could use that section of the offer to have a discussion about wire fraud with the buyer. A few lines in a 10-plus page offer, though, may not get the consumer’s attention, especially considering that during this time, the agent may also be explaining financing, appraisals, inspections, testing and other offer provisions. For that reason, an agent may choose to emphasize the discussion about wire fraud by giving the buyer the WRA’s Wire Fraud Warning form. The form includes a line for a buyer to sign to acknowledge that the agent has provided that document to them. Again, agents are not required to warn buyers about the risk of wire fraud, but by including a signature line, an agent can ask the buyer to sign because asking for a signature can often get a party to pay a little bit more attention to the discussion at hand. 

Lines 51-54 of the WB-11 Residential Offer to Purchase

CAUTION: To reduce the risk of wire transfer fraud, any wiring instructions received should be independently verified by phone or in person with the title company, financial institution, or entity directing the transfer. The real estate licensees in this transaction are not responsible for the transmission or forwarding of any wiring or money transfer instructions.

Another firm and its agents may opt to provide the WRA’s Wire Fraud Warning form earlier in the transaction when a party is signing an agency agreement or a Disclosure to Customers form, and another firm and its agents may have the philosophy of raising the discussion at a later time when closing is closer on the horizon. Or a firm could decide that educating consumers about the risk of wire fraud is its top objective and may decide to remind the buyer multiple times throughout the transaction. Because providing a WRA Wire Fraud Warning form is not required of firms and their agents, it really is up to the firm to decide when, how and whether to provide any sort of wire fraud warning to a consumer.

What else can agents do to help educate consumers?

For years now, the National Association of REALTORS® (NAR) has recommended that real estate agents include a notice about wire fraud in emails by building the notice into the email template like a signature line, logo or other elements of a firm’s email template.

NAR's wire fraud email notice template

IMPORTANT NOTICE: Never trust wiring instructions sent via email. Cyber criminals are hacking email accounts and sending emails with fake wiring instructions. These emails are convincing and sophisticated. Always independently confirm wiring instructions in person or via a telephone call to a trusted and verified phone number. Never wire money without double-checking that the wiring instructions are correct.

In addition to using a notice about wire fraud in emails, once the parties have selected the title company, title companies are requesting that agents provide the title company with the buyer’s contact information so the title company can establish communication with the buyer. By doing this, the title companies can reach out to the buyer and safely and securely provide that title company’s wiring instructions to the buyer before a criminal has a chance to hack their way into the communications.

What are some of the tips offered for consumers in the wire fraud warning form?

  • Never wire funds without personally speaking to the intended recipient of the wire to confirm the routing number and account number.
  • Verify the authenticity of any electronic communication regarding wiring instructions, including any emails purporting to change the instructions, even if the communication appears to be authentic and from a legitimate source.
  • Never send personal information such as social security numbers, bank account numbers or credit card numbers unless it is through a secure/encrypted email or by personally delivering the information to the recipient.
  • Never click on attachments or links from unfamiliar sources. These attachments or links may contain malware that may allow a hacker to access your emails, accounts and any other information on your computer.
  • Always take steps to secure the system you are using with your email account such as using strong passwords and secure Wi-Fi.
  • Immediately notify law enforcement, the lender, title agent, and the agents and firms in the transaction of any suspicious wire transfer instructions.

Where can agents and firms find the new WRA Wire Fraud Warning form?

The form is available in Transactions (zipForm Edition), the WRA PDF Forms Library subscription and on the WRA’s consumer brochure webpage at www.wra.org/consumerbrochures

Additional information
FBI Internet and Crime Complaint Center 2021 Report: www.ic3.gov/Media/PDF/AnnualReport/2021_IC3Report.pdf

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