Down to the Wire
June 22, 2023
Reading time: 2 minutes
Real estate attorneys continue to be targeted by scammers hoping to poach funds through the wire transfer process. Recent reports have revealed an 145% year-over-year increase in instances of wire fraud, with $1.4 billion in suspected wire fraud attempts during 2022. Why are real estate transactions plagued by these fraudulent schemes? In short, the potential payday to the scammer is huge.
The instantaneous delivery of funds coupled with the challenge of recovering the money make wire transfers incredibly attractive to scammers. Plus, the one-time, high dollar payout means the scammers are willing to be patient, monitor the deal, and then methodically infiltrate the transaction through bogus email accounts.
What typically happens is wire instructions are intercepted by a scammer during the course of the transaction. This could be by way of a compromised email account – the lawyer’s, client’s, or sometimes even the bank’s – which alters the instructions to wire the funds to a different account. The email address may closely resemble a party to the transaction or bank representative. Between the lawyer and their staff trying to manage already full email inboxes and finalize the deal, it is easy to overlook a fake email address. And once the wire is sent, the money is effectively gone.
So, what procedures can you use to avoid being a victim of a wire fraud scam? Consider the following tips to ensure a smooth and safe transaction:
- Do not send wire instructions by email – Avoid an email scam by simply not using email. Or, if you do use email, be sure to authenticate the numbers via phone and/or in person.
- Be suspicious of activity around closing time – Sudden changes in the agreed plan for the wire transfer or urgent last minute phone calls or emails could be a red flag that a scammer is impersonating your client or another lawyer. Don’t let a busy day distract you from your Spidey-Sense telling you something is not right.
- Create a verification protocol – Don’t allow a wire transfer to be initiated without secondary approval of all the account numbers. Have another attorney or your paralegal double check email addresses, account numbers, and discuss the recent email activity in general. A second set of eyes may catch the red flags you didn’t see.
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A basic knowledge of Article 4 of the UCC and simple precautions can help lawyers avoid becoming a victim of these schemes and protect against other potential fraudulent deposits into lawyer’s special accounts, including fraudulent settlement checks and retainer checks.
Information provided by AttPro Ally is not intended as legal advice. This publication provides best practices for use in connection with general circumstances and ordinarily does not address specific situations. Specific situations should be discussed with legal counsel licensed in the appropriate jurisdiction. By publishing practice and risk prevention tips, Attorney Protective neither implies nor provides any guarantee that claims can be prevented by the use of the suggested practices. Though the contents of AttPro Ally have been carefully researched, Attorney Protective makes no warranty as to its accuracy, applicability, or timeliness. Anyone wishing to reproduce any part of the AttPro Ally content must request permission from Attorney Protective by calling 877-728-8776 or sending an email to [email protected].
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