By Mitchell R. Landry, President | Louisiana Association of Independent Land Title Agents
As title, banking, mortgage, insurance and real estate professionals, we, as an industry, are responsible for many of the protections necessary to ensure the safety of our clients’ personal information, assets and transactions. We have all instituted safeguards in our respective sectors to do just that. We have all spent thousands of dollars implementing industry-standard protective measures. We have all spent thousands of man hours putting those things in place, in training our staffs, and in compliance with federal, state and local regulations. What we have collectively done in a few short years is nothing short of monumental.
It is not enough.
Fraudsters and scammers are breaking through those safeguards, and are stealing our clients’ hard-earned money – millions of dollars so far, just in Louisiana. And ruining lives in the process.
The scams have changed as we plug the holes which allowed the scammers access to the transactions. Some of the initial scams involved the title companies following fraudulent emailed instructions. I am personally aware of two title closing companies who fell victim to these phishing scams. In both cases, the scammers hacked into the real estate agents’ emails and monitored the transactions as they progressed. On the day of closing, knowing that the sellers were appearing by Power of Attorney, the scammers emailed the title closer with instructions to wire sales proceeds to a bank account. The title closers followed the instructions, and wired the sales proceeds as per the email request. Unfortunately, the request was fraudulent, and the sellers demanded their sales proceeds. One title company lost more than $158,000, and the other lost more than $250,000. Gone. Out of the country. Scammed. Of course, the title companies were responsible for those payments.
More recently, I have seen that the scammers have moved on to defrauding real estate buyers directly. Just this morning, I was made aware of a successful scam in the Baton Rouge area. Apparently, the scammers hacked into the email accounts of the participants to a real estate transaction, and monitored the progress. As the closing time drew near, the scammers, pretending to be the realtor, emailed the purchasers, a retired couple, and told them that the title company would not take a cashier’s check, but required a wire transfer of the funds. Pursuant to the instructions contained in the email, the victims wired $245,000, purportedly to the title company. All progressed to the closing table, and the attorney asked the purchasers for the cashier’s check at the conclusion of the sale. Buyers told of the wire sent and wiring instructions they received. Again, money is gone. Out of the country. Scammed. A retired couple lost everything, and was unable to buy the home. The same thing occurred in the New Orleans area to a first time homebuyer. He followed the wiring instructions contained in the email. Money is gone. And he is unable to buy the house.
We all have to be proactive to protect these clients.
Some great information is included in Davida Farrar’s blog post from July 7, 2017 and entitled “Buying a home? Watch out for mortgage closing scams.” The link to that post is https://www.consumerfinance.gov/about-us/blog/buying-home-watch-out-mortgage-closing-scams/. Here, though, is the pertinent information from that post, as I believe that the information contained is outstanding:
“We encourage consumers to exercise vigilance and caution to proactively guard against these scams. Below are some tips, including tips from the FTC, Financial Crimes Enforcement Network (FinCEN ), and the FBI , to help you protect yourself against these types of phishing scams and take action if you are a victim.
Avoid email phishing scams
Phishing is when internet fraudsters impersonate a business to trick you into giving out your personal information. These tips may help homebuyers avoid this type of scam.
- Discuss the closing process and money transfer protocols with your real estate or settlement agent.
- If you receive an email requesting that you send money in connection with closing, even if it’s from a familiar source, STOP. Call your real estate or settlement agent to discuss. Don’t use phone numbers or links in the email.
- Don’t email financial information. Email is not a secure way to send financial information.
- Be cautious about opening attachments and downloading files from emails, regardless of who sent them. These files can contain malware that can weaken your computer’s security.
- Before sending any wire transfer, ask your bank for help identifying any red flags in the wiring instructions. Red flags include potential discrepancies between the account name and the name of the intended beneficiary (i.e., your real estate or settlement agent). Your bank may also be able to compare the receiving account number to account numbers identified in past consumer complaints as the destination of fraudulent transactions.
- Confirm receipt of the wire transfer by your real estate or settlement agent a few hours after the wire was transmitted. If you or another entity involved in the closing suspect a problem, report it to law enforcement and your bank as soon as possible to increase your likelihood of recovering the money.
What to do if you are a victim
- Contact your bank or the money transfer company immediately upon discovering that funds have been transferred to the wrong account. Ask the bank or money transfer company to attempt a wire recall.
- Contact your local FBI and state Attorney General office .
- File a complaint, regardless of the dollar amount, with the FBI’s Internet Crime Complaint Center at www.ic3.gov . Part of the mission of ic3 is to provide the public with a reliable and convenient reporting mechanism to submit information to the FBI concerning suspected Internet-facilitated criminal activity. Information is analyzed and used for investigative and intelligence law enforcement purposes and for public awareness.
- Report the phishing scam to the FTC .
The American Land Title Association has produced a fantastic video, containing great information. The video can be found at: https://www.youtube.com/watch?v=ek4TwC9owwY. Please make this available to your clients.
The Louisiana Association of Independent Land Title Agents recommends to its members that, with every email, they include a “Bullet Point” listing of suggested “Dos and Don’ts” to help clients navigate an increasingly complex transaction:
- Last minute changes to wire instructions are rarely legitimate.
- Only the title company will issue wiring instructions, and will do so either by hard copy or by encrypted mail service.
- No changes to wiring instructions will be made by email or text.
- The party or the wiring institution should call the title company to verify wiring instructions.
- Never use a phone number contained in an email attempting to make last minute changes or changes to wiring instructions.
- Title companies are not responsible for losses if clients fall victim to these scams.
- In the event the worst happens immediately contact your bank, you have only minutes before the wire is non-retrievable, then call FBI.
Simply put for our clients:
DO NOT accept wire instructions from any party other than your title company.
DO NOT accept last minute changes to wires instructions from any party.
DO CALL AND VERIFY all wire instructions by phone before releasing wire.
I know, if only the bad actors would use all of their talent and time to do good deeds, this would be a much better world. The reality, though, is that we will always have to be hyper-vigilant. Our clients have entrusted all of us with their treasures. Let’s do everything we can to honor and protect that sacred trust.