Brace yourself for the riskiest week in wire fraud

Warning: The threat of wire fraud is surging

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As if the threat of wire fraud wasn’t already high enough this year, several factors are aligning to worsen the situation. The fact that mortgage demand is at a record high, much of the country’s workforce is still working remotely and the Fourth of July falls on a Saturday this year have combined to form a perfect storm for wire fraud. 

To put the gravity of the situation into perspective, Thomas Cronkright, cofounder and CEO of CertifID, says this could be the riskiest week for wire fraud in more than five years.

This perfect storm revolves around the fact that the fourth of July occurs on a Saturday, so the national holiday is being observed on Friday, July 3. That means the vast majority of people involved in the closing process — banks, title companies and law firms — are going to be out of the office.

The last time July 4 fell on a Saturday was in 2015. The observation of the holiday on Friday presents a problem because the Federal Reserve Bank remains open. According to the Board of Governors for the Federal Reserve’s website, “For holidays falling on Saturday, Federal Reserve Banks and Branches will be open the preceding Friday; however, the Board of Governors will be closed. For holidays falling on Sunday, all Federal Reserve offices will be closed the following Monday.”

This results in three critical situations that when combined, turn into the one of the riskiest times for wire fraud: 

  1. Borrowers and sellers are able to close on their home and wire money
  2. Key stakeholders in the real estate closing process are off work 
  3. The Federal Reserve is open to move funds 

Cronkright explained the impact of this in a LinkedIn post, stating, “Fraudsters use holiday weekends as the perfect timing to game the system.” 

“As scams take place on Thursday and wires are sent to fraudulent accounts, the fraudsters have all day Friday to launder the funds. This presents a risky scenario and may significantly lower the chance of recovery once the fraud is detected early next week,” he said. 

Cronkright, who is also the CEO of Sun Title Agency, expanded on this in an interview with HousingWire, stating, “One, you’ve got remote distancing, so the teams just aren’t synced as tight as what they were. A lot of the law enforcement at the federal level that helps with wire fraud are still working from home. And now, you’ve got an observed federal holiday where people are not going to be at their work stations.”

That means fraudsters are going to be able to move money for a full day without being detected.

With rates at historic lows and lender pipelines overflowing with refinance and purchase applications, there’s a larger than normal opportunity for fraudsters. 

When July 4 fell on a Saturday five years ago, wire fraud was nowhere near as prevalent as it is today. Wire fraud wasn’t really even a thing that anyone was talking about then, Cronkright said.  

Fast forward to last year and the Federal Bureau of Investigation estimated that $1.77 billion was stolen in 2019 due to wire fraud. This threat is also rising faster than predicted due to COVID-19 and the surge in digital transactions. 

For example, the latest FBI report showed a 50% surge in mobile banking since the beginning of 2020, likely due to stay-at-home orders, and as a result, the bureau issued a public service announcement cautioning users on the potential for increased risk of cyber fraud.

“Wherever there’s disruption, the fraudsters kind of fill that vacuum,” Cronkright said. 

He added that when borrowers are suddenly asked to wire money, it’s almost like they’re mentally thinking, “Well, the world’s changed. I just figured, sure, you need a wire rather than a check.”

“It’s almost like that guard is let down because so much change has taken place, and it might be overriding some common sense or other principles that we should have in our transactions,” Cronkright said. 

Wire fraud is so appealing to criminals not only because real estate closings involve a large sum of money, but also because of how many people are involved in the process. If fraudsters can hijack the email of just one of those key participants, they have the ability to insert themselves into the closing process and convince the buyer or seller to wire them the money instead. 

Nine times out of 10, the fraudster will typically send a phishing email or run a phishing campaign against a representative of that buyer, like an attorney, a real estate professional or a mortgage loan officer, Cronkright said. 

“As a fraudster, if I can get into the email account of somebody that’s in the transaction, then I’m getting real-time information,” he said. “Then, they’ll typically impersonate the title company or the escrow company and then present fraudulent information to the buyer.”

Fraudsters are also getting more sophisticated in their attacks, with these emails including the exact cash to close amount, the closing date and a reason why they need a wire.

Cronkright added that one of the biggest concerns he is seeing right now is that the fraudsters might be the first one to even introduce the concept of a wire in a transaction.

Although this holiday week might be one of the riskiest weeks for wire fraud, the threat isn’t going away anytime soon. 

The biggest misconception someone in or out of the industry can have around wire fraud is that it’s somebody else’s problem. Fraudsters are agnostic, he said, they’re going to do everything they can to socially engineer this story or this persona to piggyback on an already trusted relationship to divert funds.

“We just simply need to be more skeptical of the information that we’re receiving, especially around requesting the transfer of a wire,” he said.

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