How closing funds get hijacked by fraudsters

By JEFF LAZERSON / CONTRIBUTING COLUMNIST

4/1/2016

Much easier than robbing banks, email hackers are tricking home purchasers with last-minute changes to wiring instructions. The result is downpayment and closing funds are being diverted to the crooks’ account and potentially lost forever. The Federal Trade Commission is so concerned about this scam that they’ve issued a bulletin in cooperation with the National Association of Realtors titled; Scammers Phish for Mortgage Closing Costs.

Another name for this is Business Email Compromise Scam or BEC.

FBI spokesperson Laura Eimiller points out that the real estate scam is a variation of the “Man in the Middle” scam where for example, high level company officials are targeted using similar ruses to get company funds sent to a fraudster. The victim is the “mule” for the crooks as a way of getting the money out of the country.

Damon Tucker, supervising investigator with the Orange County District Attorney and John Choo, Cyber Crime nvestigator with the District Attorney, explained how this happens;

1. A computer system is hacked that provides some borrowers’ information. It could be the realty agent, escrow compay or the borrower, for example. From there the hackers also may go to social media sites like LinkedIn or Facebook to learn more about that buyer. This is called social engineering. The purpose is to gain the buyers’ trust.

2. The impersonator sends a very real looking request to that target, often with little lead time. The email will appear to very closely mimc the escrow officers’ email address. But there will be a hard-to-detect variation of the senders’ email address, such as Jane Snith instead of Jane Smith. A request for funds will be made, directing the bank wire transfer to a different U.S. bank account (crook’s accomplices) than the account proveded by the escow or title company. Shortly thereafter, the funds are wired out of the U.S. The reason for the double wiring and not going directly out of the country is that this method receives less scrutiny.

The D.A.’s office is working numerous cases. Choo said FBI information indicates that an average of $5.4 million dollars in losses are reported every month in Orange, Los Angeles, San Bernardino and Riverside counties, Scams include everything from false tax returns, to corporate phishing and real estate related issues.

Double check the email address and authenticate the wiring instructions, perhaps by picking up the phone and calling the settlement agent and reading the account information to confirm that it matches. Another thing you can do is the old-fashioned way of going to your bank and providing a cashier’s check to the settlement agent.

If your are a victim, note that there is a short window of time that investigators may be able to retrieve the funds. So, contact local authorities immediately or go to www.ic3.gov

Cyber liability insurance may cover these losses. Escrow and title insurance companies may carry this type of policy according to Wendy Holt of Holt Insurance Agency in Rancho Cucamonga.

If you have questions or comments, please contact Jeff Lazerson by clicking here.