Tales From The Trenches
There was a time when the use and reliance upon the transfer of funds by wire was an exciting and welcome development for the real estate settlement industry. Quick and easy, safe and secure, compliant with the Good Funds Laws, transfers by wire minimized per diem interest on payoffs and made funds instantly available. Then came the charlatans, masqueraders, and crooks intent on taking advantage of technology to steal, misdirect, and intercept wired funds. No one wants to get THAT call.
The office of Vested Land Services, LLC of Fairfield, NJ was one of the lucky ones. Their bank flagged what appeared to be a misdirected wire transaction and froze the funds. The story had a happy ending with no money being lost. We asked Stephen M. Flatow, owner of Vested Land Services, LLC, to share his thoughts on their recent experience. Mr. Flatow has been in the title insurance industry since 1973 and remembers carbon paper and typewriters. He is a published author [
A Father’s Story: My Fight for Justice Against Iranian Terror
available on Amazon] and frequent contributor to the Middle-East narrative.
Those Wretched Wire Scammers
By Stephen M. Flatow, Esq.
I have been saying for quite a while now, that if we could harness their energy, we would find a cure for every illness that curses us. But I am not referring to the doctors or the researchers who battle cancer and other illnesses.
No. I am referring to the scores of computer hackers and low-life pond scum, for there is no better word for them, who have been plaguing the title insurance industry, the financial industry, and their customers for the past several years with unique and not so unique scams designed to steal money from us. Unfortunately, despite our best efforts to stay one step ahead of them, we are powerless to completely protect ourselves from these thugs. Many electrons have been energized in trade and commercial publications about cybercrime and how last year it cost consumers and businesses around the world some $600 Billion so I will not go into the whys and wherefores of wire fraud, but I’d like to talk about the evil that lurks out there.
10 years ago, we faced a different scam. It was the new “client” who dropped into your office with a bank check for $25,000, told you to deposit it into your escrow account as a down payment on a property that will soon be under contract and for which you will be providing the title insurance. Three days later, you get the call, “the deal is not going forward, please return my $25,000.” You checked your bank account, saw that the money was there, and you wired the money to your erstwhile client only to find out 5 days later that the check was no good and the deposit had been reversed. You were then out $25,000, but it was easy to protect against that loss by outwaiting the clearance periods that every bank has in place for deposits.
Today’s thieves are more mysterious and are certainly faceless. They resort to hacking into email servers, computer networks and the like. The most common scam seems to be their ability to use the exact name of the legitimate email holder, and then change the wiring instructions following the first, original set of instructions.
Getting that second email is a red flag if ever there was one, but it’s still hard to protect yourself, a title agent being pressed to close, worrying about getting the loan package, reviewing closing documents, back and forth emails with the lender’s closing processor, and getting more emails from the seller’s and buyer’s attorney. Our inbox on any given day is bursting with emails, especially when no one, and I do mean no one, can seem to gather their thoughts into one email before hitting “send.”
Email #1, did you get the broker’s statements?
Email #2, how about the final water readings?
Email #3, do you have the smoke detector certificate and Certificate of Occupancy?
So, OK, enough of my ranting. Now that we are faced with this crisis, what is the title agent to do?
In my opinion, the logical conclusion may be to return to those days of yesteryear and stop remitting funds by wire. I understand we may not be 100% able to stop sending wires for mortgage payoffs, but we can certainly put some rules into place. For instance, if your office requested the payoff from a well-known commercial lending institution, sending a payoff wire is nice and easy. But when it comes to sending seller’s proceeds or paying off a private mortgage, a wire may not be the best way. Even calling the seller or lender at a number they provided to confirm instructions may not be safe. How do you know you are speaking with the legitimate party?
And never send a wire containing seller’s proceeds to an account in the name of a third party.
I’m sure that those reading this have some thoughts, too. Just make sure one of those thoughts isn’t “This wire misdirection fraud thing will never happen to me.”
There’s no doubt in my mind that cybercriminals are here to stay. The question that remains to be answered is can we outwit them?
