Canyon Culinary, a restaurant group that owns several venues in Salt Lake City, was looking into expanding and was on the verge of wiring over $1 million to the owner of a parking lot they were interested in, when the group’s Controller noticed some discrepancies in the last message they received with wiring instructions. They narrowly avoided becoming the victims of wire fraud in yet another case of a hacker infiltrating email communications with a title agency. The thieves waited until the point where a transaction was needed to complete the deal and sent their own message with a bank account they owned.
This is an emerging tactic that not even the FBI has been able to prevent or track effectively. Wire fraud of this type is not necessarily new, but there has been a resurgence in the past few years according to the National Association of Realtors and it is becoming more refined in application. Canyon Culinary was a lucky exception that avoided adding to the estimated $5 million lost in similar scams last year in Utah alone. “It’s a simple scam for the hacker to pull off, and that’s the scary thing,” said Adam Kirkham, the head of the Salt Lake Board of Realtors.
Even experienced real estate and title agents can be caught off-guard by this type of scam. Rich Hopen, a broker based in New Jersey, lost over $200,000 during a personal deal when the title agency he was communicating with sent the funds to a hacker that had hijacked their conversation and posed as Hopen. The bank where the account that received the money was hosted was unable to retrieve it in time, and the buyer, mortgage lender, and title company all became involved in lawsuits as a result.
Wire fraud cases of this type are complicated by several factors, one of the most prominent being that the banks can (or will) take only limited action within a certain timeframe. When investigated, the accounts will often be found to have originated overseas so that domestic agencies will have a harder time pursuing the culprits. The FBI can potentially stop the transaction, but only within a certain period and if notified by the bank. This is means that all of the parties directly affected the wire fraud will quickly lose control of the entire situation if they do not recognize it fast enough.
Title insurance agencies are just as affected by the wire fraud epidemic as everyone else in the real estate market, and can experience loss of revenue from funds directly lost to scammers or reparations required by victims. Title agencies are also vulnerable to hackers posing as their representatives, which as seen in Hopen’s incident and several others, exposes title agents and their organizations to legal liabilities.
To protect against the consequences of email breaches and wire fraud, title agencies must be able to secure and manage their network security on a consistent basis. Download our white paper, “Common Threats to the Title Industry and How to Prevent Them,” to learn more about the dangers of not protecting your system and what you can do to defend against them.