Ellis Posner's Pro Tips: Wire Fraud is Really A Thing | The WFA C.A.R Form

C.A.R. Form WFA | The Wire Fraud Advisory

When I first started speaking to my Buyer and Seller clients about wire fraud as relates to Real Estate transactions a few years ago, they looked at me as if:

  • a) I had two heads.
  • b) Had gone off the deep end of conspiracy theories.
  • c) Had been watching too many episodes of Homeland or 24.

Seriously. And truthfully none of the above applied.

But wire fraud is really a "thing" and if you are not very, very, careful your funds may not wind up where they are supposed to be.

That's why the following C.A.R. form is now considered a critical part of all Real Estate transactions. Unfortunately, it is one that not enough Buyers and Sellers pay attention to in my humble opinion.

FULL DISCLOSURE: I have never had a client lose any money in this manner and intend to keep it that way.

Here's what I recommend as the gold standard and it is pretty easy to do.

Verbally confirm on the phone all wiring instructions using a "trusted" phone number that you call and speaking directly with the escrow officer or assistant assigned to your file. If the escrow company is local, even better. Go into their office and confirm the instructions face to face.

That means no email (although they may send you their wiring instructions via an encrypted email) and no texting. Yes, you actually have to speak with a live human being.

Here's why:

Scammers are Tricking People Out of Lots of Money

To quote a recent CNBC article that is definitely not "fake news", hackers

"trick you into wiring your down payment to an offshore account. You lose your hard-earned money and you lose the house, and there's no way you can get either one back.

That's how some criminals have adapted the common "business email compromise" scam – so-named because it used to almost exclusively target businesses – to focus on individuals, especially people who are involved in a pending real estate transaction.

CNBC spoke with two victims of this type of crime who wished to remain anonymous. They were devastated to lose six-figure sums, their dream homes and in one case, the bulk of the individual's life savings.

And it's a crime that is growing, according to Ryan Kalember, senior vice president of cybersecurity strategy for email security company Proofpoint, which tracks cybercrimes perpetrated over email. Kalember has observed attempts at this type of crime have risen to a level 14 times higher than last year. The Federal Bureau of Investigation has also warned several times this year that email compromise schemes are spiking, which includes this type of real estate fraud."

Be Careful - the Money is Gone

The consequences for this type of scam much higher for consumers than most other cyberattacks. 

Consumers rarely see significant financial fallout from having their data, even financial information, stolen and used by criminals, because banks typically reimburse customers for fraud that occurs on their account due to stolen or compromised checking, savings or credit card numbers.

But banks are rarely are responsible for a wire authorized by the customer, even if the customer was tricked into sending it. And if the funds are overseas, there's little U.S. law enforcement can do to recover it.

In addition to the steps I mentioned above here's another tip:

Don't react immediately to email: Emails asking you to take some type of action, purporting to be from the title company, attorneys, realtors, bank lawyers or others involved in a transaction may not be authentic.

Regard any of them with suspicion, and you should follow up on known phone numbers for the individuals making the request to confirm.

As far as wiring and real estate transactions go, better safe than sorry even if people think you are paranoid.