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How Lenders Can Better Identify and Prevent Wire Fraud

Mar 29, 2019 by Brian Arnesen

Mortgage Wirefraud

Unfortunately, fraud continues to grow in the mortgage industry year over year. While we've already covered 5 common types of mortgage fraud schemes, one type continues to grow in the number of occurrences: Wire fraud is estimated to cost $30 to $50 billion annually (Source) and its complexity continues to make it difficult to curtail.

Fraudsters specifically target businesses that interact with wire transfers to intercept email traffic, alter the transaction information, and then re-route the money from either the sender or the receiving party.

Here is one example targeting mortgage lenders:

  1. A scammer obtains access to the inbox of a real estate attorney. This can be done through a simple phishing email or hack.

  2. The scammer then looks for (or requests) details about an upcoming transaction. In most cases, the scammer will attempt to obtain a closing date and transaction amount.

  3. Next, the scammer will slightly alter the email address of the compromised account to one that they created. Little things like using a "0" instead of "o" or a "." mischievously placed in the address will be a slight alteration that can be easy to miss.

  4. Next, the scammer will email the lender with different bank routing information using a sense of urgency, such as "Our wiring instructions have been updated.”

  5. The lender then mistakenly wires the funds to the scammer's bank account, who then quickly moves the funds into another account -- making the money hard (if not impossible) to recover.

From the example above, we can see wire fraud can focus on lenders just as easily as home buyers. All parties involved in the mortgage transaction can be targeted to reroute funds.

Furthermore, technology today is making it even harder to verify information. In years past, the "call and verify" method was the primary verification technique, and while it is still frequently used, phone numbers today can be spoofed to appear like they are coming from a legitimate source instead of a scammer.

While the scenario and tactics can differ from scheme to scheme, the result is the same. A fraudster impersonates a party involved in the transaction and requests funds to be wired. The methods to obtain this information are not always sophisticated. Social engineering can be used to gather information from an individual without hacking.

Today, lenders are starting to become bigger targets for wire fraud. One of the best ways to be proactive is to actively check all correspondents' details in each communication channel. This includes email and phone numbers. It's very easy to think you are talking to Person A when it's really Scammer X. . . and during the chaos of a fast-approaching closing date, mistakes can be made.

Unfortunately, once the money is wired, it can be tough to recover. Most insurance does not cover money lost due to wire fraud and recovering anything can take years.

ALTA Registery ReviewTo better verify contact details for mortgage transactions, QuestSoft has recently integrated the ALTA Registry into its automated compliance program. The ALTA Registry is a database where lenders can verify company information and personal identification information for underwriter-confirmed title agent companies, real estate attorneys and underwriter direct offices.

Verifying this information during closing can prevent lenders from wiring money to a fraudulent company/or individual. Contact us today to learn more!