To hackers, we
are all walking around with a bullseye on our back. It’s that plain and simple. Real estate lawyers, particularly
conveyancers, transfer large amounts of money on a daily basis, and sometimes operate
with sub-par and outdated cyber security systems. If you and your clients are the target of any
of these hackers and scam artists, you could face losses of six figures, or
more.
The days of the
obvious scam emails from a foreign prince (usually from Nigeria!) seeking your
aid in securing his rightful legacy have long passed. Today’s scammers are far more sophisticated
and savvy. The three most common scams
are: the Compromised Wire Instruction Scam, the Counterfeit Check Scam, and the
Forged IOLTA Check Scam.
Compromised Wire Instructions
The most
prevalent and alarming scam targeting real estate lawyers involves compromised wire instructions, also
known as the Business Email Compromise (BEC) or the “Man in the Email Scam”. The FBI has estimated the losses from these scams
at over $2 billion in 2015.
In this
scenario, you receive emailed wire instructions from the seller. The deed goes on record, and you wire the
funds pursuant to the wire instructions emailed to you. The seller then calls looking for her sale
proceeds that have not yet hit her account, despite the fact that they left
yours. As it turns out, the wire
instructions you received were not for the sellers account. The message came from an email address that
was very similar to the seller’s address, but you would have to be looking very
closely to realize that it was slightly different. There are of course many variations of the
same theme. Here, the hackers targeting
real estate lawyers, hack into your email account and monitor your account for
a period of time tracking a transaction that involves a transfer of money. At the moment in the deal that wire
instructions are requested, the hacker makes his move and provides false instructions. If the wire instructions were already sent by
the correct party, the hacker may wait some time then send a subsequent email
acting as the party stating that they actually want to change their previous
email instructions and wire the funds to a different account. Once the money
leaves your account, the funds are lost and the bank may not liable because it
merely followed your instructions.
Hackers particularly
like to strike on the Friday before a long weekend, at the end of the month, or
the days before a holiday – all times when they know that conveyancers are
overloaded, busy and may overlook small details.
Here are some
red flags you should look out for:
1.
Wire requests and instructions received on a
Friday, especially a Friday before a long weekend, or the day before a holiday;
2.
Any
revisions to wire instructions previously provided;
3.
Wires to foreign countries;
4.
Changes in the email addresses or the look of
an email from prior email messages;
5.
A sense of urgency by the requestor or
beneficiary.
Counterfeit Check Scam
In the counterfeit
check scam, a new client contacts your office seeking representation. You may even have several telephone calls
with the would-be client, and then proceed to send over an engagement agreement. It is important to note that these scammers
are incredibly informed on the would-be deal. They can be very convincing. They will then send you a seemingly
legitimate bank cashier’s check for a retainer.
You deposit the check into your IOLTA account. Shortly thereafter, the
client contacts you and tells you that the matter is resolved or that they no
longer require representation. They
instruct you to deduct any amount for legal fees accrued and to wire the
remainder back to them. You follow the client’s instructions and two to three
days later, your bank tells you that the check was counterfeit and that you are
responsible for the shortfall. Some banks make “funds immediately available” as
an accommodation to conveyancer clients, but it is important to understand that
this is a “provisional credit” only. If
the check does not clear (which can sometimes take up to even 10 days), the
bank will retract the credit. Again,
your bank is not liable because they followed your wire instructions.
Forged IOLTA Check Scam
Think of how
many IOLTA checks you circulate on a daily basis and how many municipalities, organizations,
and people have access to those checks. The forged IOLTA check scam, like the
previous scam, involves very good counterfeit checks. These checks are so artfully forged, even the
experts may have a difficult time catching the forgery on its face. The
scammer will obtain the account and routing number from your check or wire
instructions and then create a fake check payable to “cash”.
There are more
than these three scams lurking around, such as malware that makes dummy
websites nearly identical to bank sites in order to steal your log-in
information. All these scams however,
have one thing in common: they want to steal from you and your client. Conveyancers beware.
Noel Di Carlo is a Partner at Warshaw, Di
Carlo & Associates, PC, where she concentrates her practice in real estate
and personal planning. She also serves
on the REBA Board of Directors. Noel can
be reached at ndicarlo@warshawlaw.com.
