BARRISTER'S BRIEFING: Wired for Safety From Fraud
Leon Cameron, Esq. | August 2017
In the fall of 2015, National Association of Realtors’ General Counsel Katie Johnson solicited a show of hands at the Idea Exchange Council for Brokers as to who in attendance had experienced wire fraud. Surprisingly, more than one-third of the audience acknowledged they had been victimized by this type of felony.
Most often this occurs by hackers gaining access to e-mail accounts through captured passwords whereupon they search for emails related to real estate transactions. Typically, the scam entails the hacker sending a spoof e-mail to a buyer about to close stating that there are “new wiring instructions,” which includes a fraudulent account. The buyer then sends the purchase monies to said account, where it is then lost forever. Unfortunately, Errors and Omissions insurance policies typically do not provide coverage for funds stolen through this method.
At the 2016 Realtors Legislative Trade Meetings and Trade Expo in Washington, D.C., NAR Associate Counsel Jessica Edgerton presented suggestions to help Realtors and their clients avoid becoming victims of wire fraud. Those ideas, which were presented to the Professional Standards Forum and Committee Meeting, were:
• Develop a standard warning about wire scams into your electronic signature and/or include a disclaimer in your signature that states you will not discuss personal financial information through e-mail. A template warning could be drafted as follows:
“Never trust wiring instructions sent via e-mail. Cyber criminals are hacking e-mail accounts and sending e-mails with fake wiring instructions. These e-mails 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.”
• At the onset of each real estate transaction, tell your clients what your standard communication preferences and under what circumstances would those preferences be subject to change.
• If you do engage in a wire transfer with a client, phone them immediately prior to sending wire funds so they know they are sending those monies to a legitimate source.
• Avoid free Wi-Fi with no firewall to avoid attacks from hackers.
• Use complex passwords and encourage your clients to do the same. As a best practice, advise your clients to change their password before wire transactions are sent.
• Brokers should consider utilizing a staff person for monitoring, updating and implementing security systems and procedures.
Another best practice may be to send wiring instructions via facsimile, which is less susceptible to hacking. The fax may be secured via a phone call that the intended person will be present at the fax machine to receive such instructions, and then to later confirm the instructions were received. In addition, brokers may want to consider delivering wiring instructions in person to the intended individual and to ensure that said instructions are destroyed shortly thereafter.
By following these practices, brokers and agents can greatly reduce the chances that either they or their clients will become the victims of wire fraud. Additionally, since attorneys traditionally perform closings in New York, real estate licensees should inquire of the security practices of closing attorneys handling wired funds.
Editor’s Note: The foregoing is for information purposes only and does not confer an attorney/client relationship. For a legal opinion or advice specific to your situation, please consult with a private attorney at law.