Spotting scams: Tips for preventing and identifying fraud

Once fraudsters have access to personal data, they can attack their targets at any time. Often, those being scammed don’t immediately know they’re victims, making recovery difficult. And because the victims authorized the requested transactions, they can be fully responsible for any financial loss that results from the fraud. What’s more, the violation of trust can have an emotional impact on its victims.

Earlier this year, the FBI issued a warning about evolving wire transfer email scams, which have hit the real estate industry particularly hard. From 2015 through 2017, there was a 1,100% rise in the number of real estate scams and a 2,200% rise in reported monetary loss as a result.¹

One scam to watch for involves fraudsters gaining access to an escrow company’s email system and sending false wire instructions to clients. After receiving the seemingly legitimate request, the client shares the information with their advisor, and both verbally approve the escrow transaction. Real estate transactions can be compromised in many other ways, but you can help safeguard your clients against scams by using standard client-verification processes, educating your clients, and being vigilant.

What is a scam and how does it happen?
A scam is a fraudulent scheme used to swindle an individual out of money or possessions under false pretenses. Scam victims willingly comply, usually believing the money or information is being used for a different purpose or sent to a trusted recipient.

A scammer may approach persons of interest via email, phone, text, or mail. The attacker will often pose as a trustworthy source and persuade the individual to perform an action that benefits the perpetrator, such as sending or accepting funds.

See the Fraud Encyclopedia to learn more. This comprehensive resource provides definitions and examples of other common fraud techniques that you can use to educate yourself and your staff.

8 tips to prevent or identify a scam

Conversations about wire transfers should go beyond just confirming that you’re speaking to your client. Here are some best practices:

1. Be on the lookout for spoofed email addresses. Sometimes an email address will be very close to a real email address, but off by one letter. For example, you might receive an email from anthony.doe@titlecomparny.com instead of anthony.doe @titlecompany.com.
2. Ask questions about where the client is sending money and why—especially if this is not typical of your client’s past behavior, if the instructions are new, or if the funds are going to a new recipient.
3. Encourage clients to verbally verify transfer instructions with the recipient and to ask for supporting documentation. This can be done through a phone call or video chat.
4. Suggest that clients view any goods in person before agreeing to purchase.
5. Consider using services that have purchase protection and/or an escrow service until both parties agree that the transaction is satisfactory, especially for high-dollar transactions.
6. Recommend that clients conduct online searches, check with the Better Business Bureau, and perform other due diligence to confirm the legitimacy of the offer.
7. Determine if your client understands the details of the request or the transaction.
8. Have clients exercise caution when choosing a payment method. For example, fraudsters often request currency such as bitcoin, gift cards, and prepaid debit cards. Fraudulent wire requests are difficult to recall.

Case study: Real estate scams are still hot
What happened?
A client was preparing to close on a new home and received email instructions from the title company. The email prompted the client to wire $400,000 to the title company. The client worked with their advisor to send the wire.

How was the fraud detected?
Days after the wire was sent, the closing was delayed because the title company claimed not to have received the funds. The client provided proof of the disbursement, and it was discovered that the wiring instructions used did not match those of the title company. Further review revealed that the message came from an email address that only looked like it was from the title company—but was actually one letter off.

A recall request that was sent to the bank could not be accommodated, as the funds had already been removed from the client’s account. In this case, the client authorized the wire request, believing they were acting on legitimate instructions from their title company. Because the client approved the disbursement, they were responsible for the loss.

This type of fraud is relatively common and cannot be detected by a standard verification call to your client to confirm that they authorized the wire.

Keep these fraud-prevention tips on hand so that you and your clients can take precautions to reduce the risk of being scammed.

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