All parties involved in real estate transactions need to take care in how they handle the closings and wire funds. Reports in both the United States and Britain show in increase in what is known as “spear phishing”.
An article by Rose Meily published in the San Jose Mercury News states, “Small real estate businesses, agents and their clients are increasingly becoming targets of sophisticated cyber scammers, according to panelists at a risk management forum at the 2015 National Association of Realtors Conference & Expo held last month in San Diego.”
The article goes on to quote Jessica Edgerton, associate counsel to the National Association of Realtors, stating that “real estate professionals have reported an upswing in spear phishing, a particular wire scam where a hacker breaks into an agent’s email account and obtains information about an upcoming real estate transaction. After monitoring the account, the hacker will send a mock email to the buyer as they near closing, posing as the agent or someone from the title company and requesting that the buyer wire transaction-related funds.”
A recent article in the Telegraphhighlights a similar trend in Britain, and indicates the problem is “escalating, with latest figures showing fraudsters carrying out two successful conveyancing frauds a week, earning them in the region of £250,000 [$162,360.81] a week.”
One method used by fraudsters is malware that accesses the computers of individual buyers and sellers, as well as those of the real estate agents, title companies and law firms. Public Wi-Fi and poorly protected Wi-Fi systems are also fertile ground for accessing people’s emails. From there, a hacker can sift through the emails until information is found about a pending real estate closing. With the information gleaned through the emails, a hacker can then spoof the email of the seller or other appropriate party to communicate a ‘change’ in the wire instructions so funds are diverted into the criminal’s account.
One practice that can prevent a criminal diversion of funds is to always confirm by phone any emailed requests for changes to wire instructions. Parties also need to avoid using public Wi-Fi networks with their mobile devices when real estate and other transactions are pending that involve the wiring of closing funds.
With the increase in spear phishing, all parties to a real estate transaction needs to up their game to avoid become the victim or unwitting conduit to cyber fraud.