Ethics Exchange
A bi-weekly column by the
Greater Milwaukee Association of REALTORS®
Do you have a question or topic related to REALTOR® ethics that you would like addressed in a future issue of Ethics Exchange? Click here to e-mail Scott Bush at the GMAR.
OVERVIEW
Real estate wire fraud continues to be one of the most prevalent cybercrimes in the U.S. About 13,638 people were victims of wire fraud in the real estate and rental sector in 2020 (a 17% increase over 2019) with losses of more than $213 million ), according to FBI data. That ranks real estate and rental wire fraud #7 out of more than 30 types of fraud tracked by the FBI's Internet Crime Complaint Center.

The highest reported fraud in real estate in 2020 was Business Email Compromise/Email Account Compromise (BEC/EAC.) Fraudsters will assume the identity of the title, real estate agent or closing attorney and forge the person’s email and other details about the transaction. The scammers will then send an email to the unknowing buyer and provide new wire instructions to the criminal’s bank account.

Based on victim complaint data, BEC/EAC scams targeting the real estate sector continue to rise. From calendar year 2015 to calendar year 2017, there was over an 1100% rise in the number of BEC/EAC victims reporting the real estate transaction angle and an almost 2200% rise in the reported monetary loss Victims participating at all levels of a real estate transaction have reported such activity to the Internet Crime Complaint Center.[1]

[1] Business E-mail Compromise The 12 Billion Dollar ScamThu (Federal Bureau of Investigation, Jul. 12, 2018)
LEGAL
Real estate transactions are an attractive target for sophisticated fraud scams. In a typical scenario, cybercriminals identify a pending sale transaction and then build a profile of the parties—including the title company, real estate agents, and the buyer and seller. They hack into one or more parties’ email account and monitor email traffic for their opportunity to strike, usually sending false wire instructions that divert deposits, closing costs and even mortgage payoff funds from their intended, lawful recipient.

In a real estate transaction, wire fraud is generally purported using one of these techniques:
  • Business E-Mail Compromise (BEC) – Targets businesses working with foreign suppliers and/or businesses regularly performing wire transfer payments.
  • E-Mail Account Compromise (EAC) – Targets individuals. These sophisticated scams are carried out by fraudsters compromising email accounts through social engineering or computer intrusion techniques to conduct unauthorized transfer of funds.
  • Phishing/Vishing/Smishing/Pharming – Unsolicited email, text messages, and telephone calls purportedly from a legitimate company requesting personal, financial, and/or login credentials.
  • Spoofing – Contact information (phone number, email, and website) is deliberately falsified to mislead and appear to be from a legitimate source.

Implementing wire fraud risk management strategies will help members and associations minimize liability for losses due to fraudulent cyber schemes. And, insurance coverage may be available to help mitigate the damages of a cyberattack or wire fraud incident.

Recommended Practices:
  1. Educate buyers about possible scams. Many brokers are requiring a signed disclosure to acknowledge the risk of wire fraud.
  2. Include a wire fraud notice in your email signature. 
  3. Use a transaction management platform or secure email to communicate with clients.
  4. Never send wire instructions (or any personal or financial information) via e-mail.
  5. Verify wire instructions with a phone number independently obtained.
  6. Use smart email practices:
  • Double check the sender’s email addresses and call the sender if you’re unsure they actually sent the email.
  • Monitor your email account for unrecognized activity.
  • Keep your operating system and antivirus programs updated.
  • Avoid using unsecured (public) WiFi.
  • Never click suspicious attachments.
  • Use strong passwords for your email and all online accounts, and two factor authentication when available. A strong password generally has these characteristics: At least 8 characters; A mix of letters and numbers; A mix of uppercase and lowercase letters; At least one special symbol (i.e., ! @ # $).

NAR encourages all real estate licensees to know the signs of potential wire fraud and to educate their clients about these scams. Licensees should be knowledgeable about how to advise their clients if they believe they have been victimized by a wire fraud scam, and use best practices like these.

If fraud occurs, advise your clients:
  1. Time is of the essence.
  2. Immediately contact their bank to issue a recall notice of the wire transfer.
  3. File a complaint with the FBI at ICgov
  4. . Filing within 24 hours, but no more than 72 hours, provides the best chance of recovery.
  5. Contact your local FBI office

Learn More:
REFERENCES
NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require a password.

One of the most common cybercrimes in the U.S. is wire fraud in real estate. More than 13,000 people were victims of wire fraud in the real estate and rental sector in 2020, with losses of more than $213 million—an increase of 380% since 2017, according to FBI data.
We hope you enjoyed Issue #19 of Ethics Exchange 2021 brought to you by the Greater Milwaukee Association of REALTORS® (GMAR). The GMAR created this newsletter, each issue dedicated to a unique issue, because the REALTOR® Code of Ethics, on which our industry is built, is the foundation of what it means to be a REALTOR®.
Your proactive support of the Code of Ethics will assure your fellow REALTORS®, as well as members of the public, that every member of GMAR operates under the highest ethical standards.
Questions, comments or concerns regarding this issue can be directed to
Scott Bush at the GMAR Office (414-778-4929 or scott@gmar.com).