FRAUD ALERT! Diverted Wire Transfer Scam: Payoff Proceeds are the Latest Target
Tuesday, November 27, 2018
In the latest twist to diverted wire transfers, fraudsters are now targeting loan payoff proceeds. Fraudsters intercept payoff statements sent via email and e-fax, and then alter them before sending them on to the settlement agent. This alarming new trend may significantly impact the industry and potentially exceed the losses from diversion of seller proceeds and buyer closing funds by a wide margin.
In California, title companies have fallen victim to the crime. In one instance, the altered payoff statement appeared to come from a loan servicer on behalf of a private party loan. However, the payoff really came from a spoofed email account created to impersonate an employee of the loan servicing company. In another instance, a nationally recognized bank sent a loan payoff statement. Then two days later, an unsolicited, updated statement came from whom the settlement agent thought was the lender modifying only the bank wire information. The statement and all other information contained was identical. In numerous other instances, the payoff statements appear to come from a related third party, when in fact a fraudster compromised the email account of the third party and sent a modified payoff statement. Third parties have included the seller’s attorney or real estate agent and other interested parties.
The fraudsters monitor real estate transaction through internet accessible sites and hacked email accounts. When the property status updates to pending to reflect a sale, the fraudsters start watching the transaction by infiltrating one or more of the parties’ email accounts, which can be obtained from the websites. They watch the email traffic looking for payoff statements generated by a lender to the seller’s attorney, seller’s real estate agent or to the settlement agent directly. At that point, the fraudster intercepts and alters the statement then forwards it on with bank wire information for a “money mule” (someone who transfer money acquired illegally on behalf of others) instead of the actual lender.
How do you avoid falling victim to the crime?
- Set up a repetitive wire transfer feature in your production system. Include the bank wire transfer information of the entities you repeatedly wire to the most, then lock down the wire information for that entity. If an employee receives a payoff statement containing bank wire information differing from the account information in your system, you will know they may have received fraudulent account information in an attempt to illegally divert funds.
- Disbursement should always make sense. If a nationally recognized bank supplies a loan payoff, the payoff should not direct the funds to another banking institution.
- Pay attention to details of each payoff statement. The account name on the wire instructions should be that of the payee or corresponding bank and no one else.
- Order the payoff yourself and don’t rely on payoff statements submitted by others, such as the borrower themselves, when possible.
- When you must rely on a payoff statement received from outside third parties, verbally verify all bank wire information. Only use a known, trusted telephone number and not the number reflected on the payoff statement. Statements with differing contact information are a red flag of fraud.
- Verbally verify every non-institutional payoff every time, since the bank wire information is typically not available from previous successful wires.
- When verbal verification is not possible, send a check via overnight delivery instead of transmitting a wire.
Every wire transfer has become a target within real estate transactions. In order to protect our companies and the entire industry we must remain diligent. Verify all payoff statements are authentic before wiring funds.