An Oregon couple on the verge of purchasing their dream home mistakenly submitted funds meant for their real estate broker and the title insurance agency involved in the deal to scammers who had hijacked their email thread with both of the former. While still communicating electronically with representatives of both organizations, they suddenly received a message in the chain claiming that they needed to send the money immediately to avoid a delay on closing the property.
It was not long after that they contacted their broker to finalize the deal and found that they had lost their $379,000 in a case of wire fraud. “In this case, the emails and the directions on the wire (apparently) came from a trusted source,” said Lebanon Police Det. Justin McCubbins.
According to data provided by the FBI, hackers targeted almost a billion dollars’ worth of real estate transactions in 2017, which amounted to an over 5000 percent increased from the previous year. The FBI’s Internet Crime Complaint Center reported that between 2015 and 2017, there were over 20,000 cases of Business Email Compromise (BEC) that amounted to over $1.6 billion dollars in losses. New information released by the FBI recently states that the volume of losses resulting from BEC and “E-mail Account Compromise” (EAC) from 2013 to 2018 has risen to almost $3 billion in the US and $12.5 billion worldwide.
A significant portion of these were concentrated in the real estate sector as cybercriminals have recently begun to target organizations in this industry due to the large digital transactions being made frequently. This threat is not limited to one area of the market, as demonstrated by a warning the New Jersey Department of Banking and Insurance issued to all businesses involved in mortgage lending in the state. In fact, NJ was one of the states that most frequently experienced wire fraud in 2017, after California, Florida and New York.
The NJDOBI’s alert included much of the same information as the FBI’s repeated warnings – and both mirrored almost the exact details of the wire fraud incident in Oregon. “There’s been a lot of these cases,” said Ken Westin, a senior security strategist and researcher in Portland. “I know hackers are going after either title companies or real estate agents. This is becoming pretty common.”
The couple managed to recoup a significant portion of the fraudulent wire transfer from Bank of America, which held the account which the hacker directed them to. However, this was only after they exposed the situation to the media and brought attention to the bank, as well as their broker’s agency. The couple has since threatened to sue their former broker for imposing closing delay fees and failing to make up for their losses, but the broker contends the liability falls on their former clients.
Though the messages which entrapped the couple came from the same email thread the broker and title agency used to communicate with them, there were obvious grammatical errors and the broker claims that these were warning signs the clients ignored. However, certain factors may give the couple legal precedent to seek damages from the broker, as well as the title agency involved.
A similar incident affected another couple in Denver, who lost approximately $270,000 to wire fraud. They brought a lawsuit against Wells Fargo for not notifying the FBI of the fraudulent wire transfer in time to enact a “Financial Fraud Kill Chain,” along with the real estate agent, the mortgage lender and the title agency who had overseen the deal for negligence.
Wire fraud is one of several serious threats to title insurance agencies in the modern real estate market. Learning how to identify and prevent these differences can be the difference between being solvent and a huge loss.
Read our white paper “Common Threats to the Title Industry and How to Prevent Them,” to discover how to protect your agency.