Independence Day Holiday Increases Risk for Wire Fraud, CertifID Warns

July 2, 2020

As title and escrow companies scramble to close loans before observance of the July 4th holiday, special circumstances may present a higher risk of wire fraud, CertifID said in an advisory.

This is due to the fact that most professional offices will be closed on Friday, but the Federal Reserve will remain open. 

Most federal holidays fall on a weekday and the Federal Reserve, which handles the transfer of funds (including wire transfers), closes in observance of the holiday. However, when a federal holiday falls on a weekend, the observance of the holiday is on Friday (if the holiday is on Saturday) or on Monday (if the holiday is on Sunday). If the holiday is observed on Friday, the Federal Reserve remains open. If the holiday is observed on Monday, the Federal Reserve is closed. This year’s Independence Day falls on a Saturday which provides a unique opportunity for cyber fraudsters that has not been present in the past six years—many offices will be closed, but the Federal Reserve will be open. Put simply, wire transfers that are sent to fraudulent accounts on Thursday will provide an opportunity for cyber perpetrators to launder the stolen funds on Friday while most people are on vacation which may significantly diminish the ability to recover funds early the following week.

“We are in a perfect storm right now as the title industry is adjusting to the ‘new normal’ of prolonged social distancing measures that include work from home, remote online closings, and a sharp increase in the use of electronic funds transfers,” said Tom Cronkright, CEO of CertifID. “We had visibility into several fraud schemes that took place over Memorial Day weekend a few weeks ago and noticed an alarming trend—the speed at which money is moved or ‘muled’ between accounts is alarming.  Recovery of stolen funds may come down to minutes or hours, not days, as money is transferred in nearly real-time to avoid detection and recall.”

All incoming and outgoing wire transfers are at risk, so it’s important for all parties in a real estate transaction to slow down and clearly communicate how and when a wire transfer may take place so that funds are not lost. Here are a few things to consider to ensure the safe transfer of funds this Independence Day:

  1. Educate the borrower and other transaction participants about the risks of wire fraud even if they are intending to bring a check to the closing.
  2. Clearly explain how wiring instructions will be shared prior to funds being sent for closing or disbursed after closing—it’s important to include examples of what NOT to expect so that fraud attempts may be identified and thwarted.
  3. Securely share wiring instructions via encrypted email or other secure platforms that include the identity verification of the parties receiving or confirming the instructions—DO NOT share or rely on wiring instructions sent through standard email messaging.
  4. Be suspicious of any “new” or “updated” payoff information.  Mortgage payoff fraud is on the rise and fraudsters may use email, fax, phone or even postal mail to provide fraudulent payoff instructions.
  5. Verify the wire transfer was received by the intended recipient. Most wire transfers are completed within a few hours but should not take more than one business day. 

Common sense and intuition can play an important role in fraud prevention as well.  If something does not feel right, take a step back and validate the source of wiring information and the bank credentials before funds are wired. Finding a trusted contact number from an independent source and making direct contact is a great place to start.  Remember to document the steps taken to protect the transfer of funds in case you need to rely on this later.

With heightened awareness, communication and standards around wire transfers, all parties in a transaction can be safer from the threat of loss. 

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Contact ALTA at 202-296-3671 or communications@alta.org.

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