Wire fraud is a growing issue for consumers and financial institutions involved in real estate transactions. It’s an area that Congress should focus on as it affects consumers in every state in America.
On Wednesday, the Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee held a hearing to examine compliance with the anti-money laundering (AML) provisions of the Bank Secrecy Act (BSA). How is wire fraud related to the BSA/AML and the hearing? According to ACAMS Today, the leading publication for career-minded professionals in the financial crime detection and prevention field, criminal activity related to fraud generates money that needs to be concealed and legitimized. Where there is fraud, there is money laundering.
The FBI says the number of wire fraud scams reported by title companies to the Internet Crime Complaint Center (IC3) spiked 480 percent in 2016. According to the FBI, perpetrators monitor real estate transactions and time their fraudulent requests for changes in payment type (frequently from check to wire transfer) or changes in payment destination to a different account under their control.
There are two common wire fraud scams. The first is known as Business Email Compromise (BEC). This scam targets businesses working with suppliers and/or businesses that regularly perform wire transfer payments. The second is called Email Account Compromise (EAC). This version of a BEC targets individuals who perform wire transfer payments. The FBI said that these scams have been reported in all 50 states and in 131 countries. Victim complaints filed with the IC3 and financial sources indicate fraudulent transfers have been sent to 103 countries. Criminals sought to steal roughly $5.3 billion through this fraud.
ALTA is working with lending and real estate industry groups to increase awareness about wire fraud, identify and promote industry best practices to deter wire fraud and advocate for steps the government can take to protect people from hackers. ALTA also has several suggestions for various players in the industry that could help cut prevent these devastating crimes.
Real estate and mortgage professionals should alert homebuyers at the outset of the transaction to never open unsolicited links or attachments, to avoid sending any sensitive financial information by email and to use an independently-verified phone number to confirm wiring instructions for their earnest money deposit or down payment.
Businesses should follow these best practices and contact law enforcement immediately if fraud is suspected, especially by reporting wire fraud.
In addition, Congress should consider increasing criminal penalties for wire fraud to be as tough as criminal penalties and sentencing guidelines for identity theft and bank robbery.
Finally, a simple change in practices can be the single biggest deterrent to wire fraud: When sending a wire, financial institutions should match the payee’s name with the account number.
Consumers and businesses with an increased awareness and understanding of the BEC/EAC scam are more likely to recognize when they have been targeted by fraudsters, and are therefore more likely to avoid falling victim and sending fraudulent payments.
BY DANIEL MENNENOH, OPINION CONTRIBUTOR
