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How NOT to Fall Victim to Wire Fraud
Advice and Tools from the FBI to Fight the Growing Threat

by Christine Sparks, ATG Vice President and Managing Attorney, Claims and Audit

Cyber crimes are on the rise, and the title insurance industry is being targeted. So much so that the American Land Title Association (ALTA) has made cybersecurity one of the focuses for the year ahead. The schemes change regularly, the fraudsters are sophisticated, and every part of our region has been affected. This is not limited to one geographic area or state — all ATG agents must be vigilant.

ATG has informed member agents about email wire fraud schemes multiple times over the last several years through direct email bulletins and in-depth website content (read more). Over the past several months we have experienced a significant increase in the frequency of email wire fraud schemes — almost weekly occurrences — including multiple ATG agents and other Illinois law firms and title agencies. We have also seen an increase in the sophistication of those participating in these schemes.

Senior staff from ATG recently participated in an Illinois Mortgage Fraud Task Force meeting that included participants from several governmental agencies, including Housing and Urban Development (HUD), the Federal Bureau of Investigation (FBI), and the United States Department of Justice. All parties confirmed the uptick in the number of email wire fraud schemes.

What do the email fraud schemes look like?

Here is a typical email fraud scenario:

• A fraudster intercepts an unencrypted email messages that contains wire instructions, which are usually included as an attachment to the email.
• The fraudster changes the content of the email and the wire instructions attachment, then routes the email to the party who was the original intended recipient.
• The wire instructions, altered by the fraudster, now direct money to an account under the fraudster’s control.
• The email that is ultimately routed to the intended recipient often looks like it has the firm’s contact information, but it really directs the recipient to a phone number affiliated with the fraudster.

The FBI has an Internet Crimes Center dedicated to tracking and educating about schemes that involve internet crimes. See the Federal Bureau of Investigation's Internet Crimes Center website for additional statistics and information about what internet crimes are being reported. The press room section of the website provides specific information about two common variations of email crimes, including Business Email Compromise and Email Account Compromise.

What can you do to protect yourself and your law firm or title agency?

When you are talking to your clients for the first time regarding their real estate transaction, make the clients aware that this type of fraud exists. Advise your clients how wire instructions are handled; give them your direct contact information and encourage them not to use phone numbers or email addresses that are in the body of the email. Inform your clients that you would not send revised wire instruction to them by email. One variation on the scheme is when a fraudster sends "updated wire instructions" to parties who previously received valid wire instructions by email.

As a reminder, ATG has instructed all members to implement the following procedures to protect their transactions:

1. Send wire instructions only by encrypted email or fax.
2. Instruct all parties who receive wire instructions to re-send wire instructions only by encrypted email or fax.
3. Instruct all recipients of wire instructions to call to confirm the accuracy of the instructions they receive before sending a wire.

We encourage you to implement the above procedures, and be sure to talk to all parties involved in the transaction, including realtors, to make them aware that this problem is out there and hitting people in every market that ATG serves.

We also strongly encourage you to discuss with your errors and omissions or professional liability carrier whether it makes sense to add a cyber crime endorsement to your policy. Most policies do not cover cyber crime related losses without an additional endorsement.

What should you do if you are hit by an email fraud scheme?

1. Contact your financial institution as soon as you become aware of any fraudulent transfer.
2. Contact law enforcement.
3. Contact your local FBI office. Contact information for the Chicago office is available on the FBI website.
4. File a complaint with the FBI Internet Crimes Center. The complaint form can be filled out on their website.

Do not be afraid to reach out to us at ATG. We have contacts with most law enforcement agencies and are happy to help direct you to the right people. Any chance of recovering diverted funds is dependent on taking immediate action.

For more information about wire fraud, see our prior bulletins on this topic.

[Last update: 11-19-15]

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