AVOIDING WIRE FRAUD

The Isaacs Team Districtre.com

How To Protect Against Real Estate Wire Fraud

Why Do I Need To Worry About Wire Fraud?

Wire fraud attempts are surging in the U.S. according to a recent FBI Advisory. These attacks, in the form of email hacks and phishing schemes, have increased dramatically from 2013 to 2017. The Bureau’s Internet Crime Complaint Center  reports an unprecedented number of attempts globally, especially via emails purporting to be from trusted business associates. They estimate the value of the targeted funds at $5.3 billion USD, but some experts say it could be double that amount. Wire transfers are common in real estate transactions. It’s important to know what the threats are and how to protect yourself against them.

How Does Wire Fraud Occur?

According to the FBI’s advisory, Business Email Compromise (BEC) is a sophisticated scam targeting businesses working with foreign suppliers and/or businesses that regularly perform wire transfer payments. This would include banking institutions and title companies. The Email Account Compromise (EAC) component of BEC targets individuals that perform wire transfer payments. Because the techniques used in these scams have become increasingly similar, the IC3 to begin tracking them as a single crime type in 2017. Here’s how the scam works:
  • A perpetrator compromises legitimate business email accounts through social engineering or computer intrusion techniques to conduct unauthorized transfers of funds;
  • Most victims report using wire transfers as a common method of transferring funds for business purposes;
  • Some victims report using checks as a common method of payment. The scammers will use the method most commonly associated with their victim’s normal business practices;
  • The scam has evolved to include the compromising of legitimate business email accounts and requesting Personally Identifiable Information (PII) or Wage and Tax Statement (W-2) forms for employees, and may not always be associated with a request for transfer of funds.
The victims of the BEC/EAC scam range from small businesses to large corporations. The victims continue to deal in a wide variety of goods and services, indicating that no specific sector is targeted more than another. It is largely unknown how victims are selected; however, the subjects monitor and study their selected victims using social engineering techniques prior to initiating the BEC scam. The subjects are able to accurately identify the individuals and protocols necessary to perform wire transfers within a specific business environment. Victims may also first receive “phishing” e-mails requesting additional details regarding the business or individual being targeted (name, travel dates, etc.).
  • Some individuals reported being a victim of various “scareware” or “ransomware” cyber intrusions immediately preceding a BEC incident. These intrusions can initially be facilitated through a phishing scam in which a victim receives an e-mail from a seemingly legitimate source that contains a malicious link. The victim clicks on the link, and it downloads malware, allowing the subject(s) unfettered access to the victim’s data, including passwords or financial account information;
  • The BEC/EAC scam is linked to other forms of fraud, including but not limited to: romance, lottery, employment, and rental property scams. These victims are usually U.S. based and may be recruited as unwitting money mules. The mules receive the fraudulent funds in their personal accounts and are then directed by the subject to quickly transfer the funds to another bank account, usually outside the U.S., upon direction, mules may open bank accounts and/or shell corporations to further the fraud scheme.
There are a number of scenarios scammers use to separate you from your money. Here are the most common, according to the FBI:
  • Scenario 1: Business Working with a Foreign Supplier
    A business that typically has a longstanding relationship with a supplier is requested to wire funds for an invoice payment to an alternate, fraudulent account. The request may be made via telephone, facsimile, or e-mail. If an e-mail is received, the subject will spoof the e-mail request so it appears similar to a legitimate request. Likewise, requests made via facsimile or telephone call will closely mimic a legitimate request. This particular scenario has also been referred to as the “Bogus Invoice Scheme,” “Supplier Swindle,” and “Invoice Modification Scheme.”
  • Scenario 2: Business Executive Receiving or Initiating a Request for a Wire Transfer
    The e-mail accounts of high-level business executives (Chief Financial Officer, Chief Technology Officer, etc.) are compromised. The account may be spoofed or hacked. A request for a wire transfer from the compromised account is made to a second employee within the company who is typically responsible for processing these requests. In some instances, a request for a wire transfer from the compromised account is sent directly to the financial institution with instructions to urgently send funds to bank “X” for reason “Y.” This particular scenario has been referred to as “CEO Fraud,” “Business Executive Scam,” “Masquerading,” and “Financial Industry Wire Frauds.”
  • Scenario 3: Business Contacts Receiving Fraudulent Correspondence through Compromised E-mail
    An employee of a business has his or her personal e-mail hacked. This personal e-mail may be used for both personal and business communications. Requests for invoice payments to fraudster-controlled bank accounts are sent from this employee’s personal e-mail to multiple vendors identified from this employee’s contact list. The business may not BECome aware of the fraudulent requests until that business is contacted by a vendor to follow up on the status of an invoice payment.
  • Scenario 4: Business Executive and Attorney Impersonation
    Victims report being contacted by fraudsters who typically identify themselves as lawyers or representatives of law firms and claim to be handling confidential or time-sensitive matters. This contact may be made via either phone or e-mail. Victims may be pressured by the fraudster to act quickly or secretly in handling the transfer of funds. This type of BEC scam may occur at the end of the business day or work week and be timed to coincide with the close of business of international financial institutions.
  • Scenario 5: Data Theft
    Fraudulent requests are sent utilizing a business executive’s compromised e-mail. The entities in the business organization responsible for W-2s or maintaining PII, such as the human resources department, bookkeeping, or auditing section, have frequently been identified as the targeted recipients of the fraudulent request for W-2 and/or PII. Some of these incidents are isolated and some occur prior to a fraudulent wire transfer request. Victims report they have fallen for this new BEC scenario even if they were able to successfully identify and avoid the traditional BEC scam. This data theft scenario of the BEC scam first appeared just prior to the 2016 tax season.

Steps To Protect Against Wire Fraud

The FBI advisory says; “Businesses with an increased awareness and understanding of the BEC/EACscam are more likely to recognize when they have been targeted by BEC/EAC fraudsters, and are therefore more likely to avoid falling victim and sending fraudulent payments. Businesses that deploy robust internal prevention techniques at all levels (especially for front line employees who may be the recipients of initial phishing attempts) have proven highly successful in recognizing and deflecting BEC/EAC attempts. Some financial institutions reported holding their customer requests for international wire transfers for an additional period of time to verify the legitimacy of the request.” Small business may not have the same protections in place as larger institutions such as banks. The FBI offers a number of protection suggestions for businesses, but how can you, as a consumer, protect yourself?
  • Web-based email accounts such as Gmail do not offer the same protections that corporate email accounts feature. Realtors often utilize web-based email accounts. Even domain-based email accounts of smaller businesses may not be safe because small business owners may not maintain the security of their websites as well as corporations may. The best protection for a real estate consumer is to avoid interacting with real estate agents regarding details of wire transfers;
  • Establish other communication channels, such as telephone calls, to verify significant transactions. Arrange this two-factor authentication early in the relationship and outside the e-mail environment to avoid interception by a hacker;
  • Immediately report and delete unsolicited e-mail (spam) from unknown parties. DO NOT open spam e-mail, click on links in the e-mail, or open attachments. These often contain malware that will give subjects access to your computer system;
  • Do not use the “Reply” option to respond to any business e-mails. Instead, use the “Forward” option and either type in the correct e-mail address or select it from the e-mail address book to ensure the intended recipient’s correct e-mail address is used;
  • Beware of sudden changes in business practices. For example, if a current business contact suddenly asks to be contacted via their personal e-mail address when all previous official correspondence has been through company email, the request could be fraudulent. Always verify via other channels that you are still communicating with your legitimate business partner;
  • Confirm requests for transfers of funds. When using phone verification as part of two-factor authentication, use previously known numbers, not the numbers provided in an email request;
  • Carefully scrutinize all e-mail requests for transfers of funds to determine if the requests are out of the ordinary.
A complete list of self-protection strategies is available on the United States Department of Justice website www.justice.gov in the publication titled “Best Practices for Victim Response and Reporting of Cyber Incidents.”
The Isaacs Team currently utilizes a gmail account for transaction correspondence. That’s why we request that we *not* be included in communications regarding wire transfers or requests from title companies and lenders for hyper-personal information such as social security numbers. The best way to prevent wire fraud in your transaction is to follow the recommendations from the FBI.  Make sure you take wire instructions by phone only, from the wire sender or recipient directly, and only via a call you initiate with a person of authority using a phone number you research as valid (not one provided in an email, for instance). Be sure to recite the instructions back to the giver so no errors are made. Do not CC others in emails or request emailed wire instructions. If you receive a communication stating that wire instructions have changed, phone your banking institution and title company immediately for clarification and validation of the wiring instructions.

If You Are A Victim Of Wire Fraud

If funds are transferred to a fraudulent account, it is important to act quickly: Contact your financial institution immediately upon discovering the fraudulent transfer. Request that your financial institution contact the corresponding financial institution where the fraudulent transfer was sent. Contact your local Federal Bureau of Investigation (FBI) office if the wire is recent. The FBI, working with the United States Department of Treasury Financial Crimes Enforcement Network, might be able to help return or freeze the funds. File a complaint, regardless of dollar loss, with www.ic3.gov or, for BEC/EAC victims, bec.ic3.gov When contacting law enforcement or filing a complaint with IC3, it is important to identify your incident as “BEC/EAC”; also consider providing the following information: Originating business name Originating financial institution name and address Originating account number Beneficiary name Beneficiary financial institution name and address Beneficiary account number Correspondent bank if known or applicable Dates and amounts transferred IP and/or e-mail address of fraudulent e-mail Detailed descriptions of BEC/EAC incidents should include but not be limited to the following when contacting law enforcement: Date and time of incidents Incorrectly formatted invoices or letterheads Requests for secrecy or immediate action Unusual timing, requests, or wording of the fraudulent phone calls or e-mails Phone numbers of the fraudulent phone calls Description of any phone contact, including frequency and timing of calls Foreign accents of the callers Poorly worded or grammatically incorrect e-mails Reports of any previous e-mail phishing activity

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Information is believed to be accurate, but not guaranteed. Subject to change without notice. Realtors are not CPAs or attorneys and are not permitted to give tax or legal advice or interpretations. Refer to a tax or legal professional for all related matters. Any information provided on this site pertaining to such issues is not intended as tax or legal advice and is provided solely for the purpose of illustration. Resources cited are believed to be accurate but are not guaranteed.
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