Real estate wire fraud
Real estate wire fraud is among the most prevalent cybercrimes in the U.S. Much of the growth is attributed to the coronavirus pandemic, which drove more commerce online.
To combat the problem, several real estate industry groups are mounting campaigns to educate those involved in a transaction - and especially, buyers - to follow simple precautions to avoid being duped.
FBI data show more than 13,600 people were victims of wire fraud in the real estate and rental sector in 2020. That marked a 17% increase over 2019. Last year's victims lost more than $213 million. Those crimes made real estate wire fraud #7 in a ranking of 30 types of fraud tracked by the FBI's Internet Crime Complain Center (IC3). Phishing scams top the list.
Money magazine reported a third of all 2020 real estate transactions involved some sort of wire fraud attempt, based on a survey of title agents. Three quarters of agents (76%) said fraud attempts either increased or were unchanged from the year prior.
The FBI believes incidents are underreported. In fact, they estimate only around 12% to 15% of all cases get reported.
Fraudsters are increasingly sophisticated in creating authentic-looking spoof emails and inserting themselves "at just the right time" in a transaction after gaining access to an email account belonging to someone involved in the real estate transaction, be it the real estate broker, a lender, a title agent or the buyer.
Andy White, CEO of ClosingLock, a software firm that offers solutions for securely sharing wire information, said fraudsters invest time to craft legitimate-looking emails that appear to be from the title or escrow company, or attorney's office. Their email instructs the buyer to wire funds to an alternate bank account. Such schemes, dubbed "Business Email Compromise" by the FBI, led to $1.8 trillion in losses during 2020.
Tom Cronkright, CEO of CertifID, a real estate wire fraud prevention firm that offers digital identity and device verification solutions, says successful fraudulent emails tend to have four things in common: a call to action, some sort of new or updated information, a request for confirmation (which then enables scammers to reroute funds quicky) and the word "kindly." Their communications often reference something about the pandemic such as staffing shortages, vaccine developments, lockdowns, or other current issues.
Along with the emergence of software to help prevent wire fraud, public and private sector organizations are joining forces to raise awareness and reduce losses.
In collaboration with Washington REALTORS®, the Northwest Multiple Listing Service, the Washington State Department of Financial Institutes, and the Office of the Insurance Commissioner have created a downloadable "Wire Fraud Alert" pamphlet. It urges buyers and sellers to not rely solely on email communications and outlines two important steps to take before wiring money.
The FBI started gathering data on internet crime complaints in 2000, initially as the Internet Fraud Complaint Center. It was subsequently named the Internet Crime Complaint Center (IC3).
Since its first full year of operation when it received nearly 50,000 complaints, the volume has surged. Over the past two decades more than 5 million reports of thefts, scams, frauds, and other crimes with an online nexus have been logged. Since 2015, such crimes have resulted in $10 billion in losses.
IC3 reported a 70% increase in complaints between 2019 and 2020 and expects a new record this year. Its 6 millionth complaint occurred this year on May 15. Last year's top three crimes were phishing scams, non-payment/non-delivery scams, and extortion. Romance and confidence schemes, and investment fraud are also increasingly common.