Wire Fraud: A Cautionary Tale

Wire fraud on real estate transactions is a real threat. You might think of yourself as a technologically savvy, sophisticated consumer, but these scams are increasingly sophisticated as well.

On a recent transaction, the buyers, my clients, were preparing for their purchase. It was a few days before the closing date, and they were expecting to receive instructions from their attorney on where to wire the money.

Now something to realize is that these clients, let’s call them M & E, are no rubes. They know their way around a computer. They are smart. They are aware.

But they were also under stress. They had pressing commitments from work, they were packing up their house of fourteen years, while preparing to close simultaneously on both the sale of their house and the purchase of their new one. I’m sure they were also a little sleep deprived.

They received an email, purportedly from their attorney, with wire instructions and the final tally. The email referenced the correct property, had their names, and even had the attorneys name in the “from” field. The numbers weren’t in the range they expected, in retrospect a red flag. So they replied and told him the range they had been expecting, and asked him to call.

The purported attorney called on the phone. Another red flag - it was a bad connection and it seemed strange that he had an accent they did not recognize. But they didn’t really know their attorney well, he confirmed the numbers, and they were eager to get it done. They emailed him to confirm one last time, and he replied “that sounds great.”

M & E planned to use money from accounts at two different banks, so the next morning they each went to one of their banks to initiate the wires.

Their first bank sent the wire. Their second bank asked for additional information. M called her attorney to get it. He was confused, “What wire? I didn’t give you any wire instructions!”

In a panic, they ran back to the first bank. Stop the wire! It’s a fraud! By a stroke of luck, it was the same bank the fraudster used. In another stroke of luck, the fraudster had not immediately withdrawn the money - the lazy scammer was waiting for the second wire to arrive. The bank sprang into action and managed to freeze the account just in time.

The scammer realized what happened. Crushed, he sent one last email. The part I can print said, “you are not loyal.”

M & E were exceedingly lucky. The head of fraud prevention at their bank told them that in 98% of these cases the money is lost for good.

A few lessons to take from this true story:

Rules to protect yourself

1. Ask your attorney ahead of time how he/she will send you wire instructions. Many law offices now use a secure online portal. You might also set up a passphrase with your attorney to verify identity on the phone. Coordinate with your attorney ahead of time so you know what to expect.

2. Never accept wire instructions from someone over the phone, but do verify the wire information by calling your attorney’s office. It’s important that you call, with a number you already have for the attorney. (If somebody calls you, it might not be the real person.)

3. Email accounts are easily hacked, giving scammers information about the transaction. If you scroll over the name of the sender, often times it appears to be from an email account similar to that of someone involved, but it is not from the real person. Make sure to verify the email address.

4. You should never be asked to wire money to another country.

5. Trust your gut. If something seems off, no matter how urgent the deal may seem, stop and check. If you are ever in doubt about any correspondence, call your attorney and be vigilant. Getting your money back from these scams is extremely difficult.

Photo by Zach Savinar on Unsplash