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Fraud risk continues to rise even as the market contracts

Two House Appropriations bills recently advanced by House negotiators have included language surrounding Business Email Compromise (BEC) in an effort to promote collaboration between federal and law enforcement agencies and private sector partners in monitoring and reporting for cyber-based crime events.

The House Appropriations bill covering the departments of Commerce, Justice, Science and Related Agencies includes a section on BEC, noting that “the FBI has assessed that ‘BEC is one of the fastest growing, most financially damaging Internet-enabled crimes.’” It goes on to encourage the FBI to “explore ways to increase collaboration and coordination with industry and other private sector partners in addressing BEC and [email account compromise]”.

Additionally, the bill covering Financial Services and General Government directs the Financial Crimes Enforcement Network (FinCEN) to “brief the Committee within 90 days of enactment of this Act on its ongoing efforts to combat and raise awareness of business email compromise scams, including joint activities conducted with the Department of Justice, Federal Bureau of Investigation, Federal Trade Commission, and other relevant agencies.”

As agencies seek best practices, this is indicative of more specific requirements for banks, lending institutions and entities that have access to sensitive borrower data and recordable instruments. These institutions are encouraged to be ready for more scrutiny and, as a result, to deploy tools, technology, controls or processes to protect against these online threats.

Wire and title fraud levels remain high

These concerns about business email compromise and other online crimes are supported by data that shows a continued high risk of wire and title fraud during Q2 2022. According to a Q2 analysis by MISMO-certified wire and prevention fintech FundingShield, there was a 40.69% increase in wire-related issues compared to Q1 2022, as well as a 107% increase in closing agent insurance policy coverage gaps and a nearly 10% increase in CPL issues. Those insurance policy coverage issues can include misrepresentation and unlicensed or unapproved parties attempting to provide services.

“Wire and title fraud remained at all time high levels in the second quarter of 2022 while the market contracted, rates increased and fraud risk continued to rise,” FundingShield CEO Ike Suri said. “Several national law firms, title agents and independent agents had business email compromise events that FundingShield uncovered after these firms had emails going to market with fraudulent wire instructions unbeknown to anyone at the closing agent/law firms.”

The issues outlined by FundingShield’s findings are based on nearly $2 trillion in closings reviewedand highlight production errors, misrepresentations, control issues, cyber attacks and business email compromise events that create ideal conditions for fraudsters to prey on stakeholders in the homebuying process.

How FundingShield can help

Among today’s lower volumes, the need to keep costs down while still managing risks has never been greater. According to Suri, FundingShield has increased its client count by 15% in the last month alone as clients downsize and seek variable cost solutions in a challenging market where fraud is expected to increase.

“Our transaction level coverage of up to $5 million per transaction, the only offering in the market, becomes incredibly valuable and important to clients in the current high-risk environment,” he said. “FundingShield helps identify and resolve inefficiencies, threats and exposures in a timely manner so lenders can run their businesses without interruptions, reputational nightmares and losses by working with only valid, verified and vetted closing agents across the country.”

To read FundingShield’s full Wire and Title Fraud Index for Q2 2022 or other news, click here. For historical quarterly reports or more information, reach [email protected]

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