The 4 Answers on Wire Transfer Fraud that Criminals Don't Want You to Know
Digital lending and virtual consumer experiences are all the hype in today’s market and while there are a lot of benefits, it doesn’t come without its risks. If banks and mortgage companies aren’t prepared, cybersecurity and lending fraud can cause a major upset to a company’s bottom line and become a huge resource waster.
One of the biggest offenders in the industry is wire transfer fraud, in which money wiring instructions are altered so that funds get diverted to the criminal instead of the intended recipient. Criminals can carry out these schemes multiple ways and use business email compromise tactics like email phishing, identity theft, hacking, email spoofing, and malware to infiltrate a company’s systems. With so many areas open to exploitation, companies can never do too much to understand wire transfer fraud and prevent losing thousands of dollars at a time.
For more clarity, we sat down and spoke to Hannah Gresty, PitchPoint Solution’s Vice President of Product. Gresty’s been with the company for 10 years, focusing specifically in the fraud detection industry with the goal to enhance lender productivity through dynamic fraud prevention tools.
So she provided answers to some of the most common questions lenders have on the subject so they can protect themselves better.
For the industry as a whole, how serious should lenders be taking wire transfer fraud? In other words, how worried should they be?
Gresty: Wire transfer fraud is the fastest growing real estate cybercrime in the United States. It’s a prevalent attack that many lenders have already faced and will in the future. With a 480% increase in wire fraud complaints filed with the Internet Crime Complaint Center (IC3) in 2017 over the previous year, wire transfer fraud is proving to be a pervasive and prolific problem. Lenders should absolutely perform their due diligence prior to funding to a new bank account to prevent fraudulent wire transfers or they risk losing thousands, maybe millions, of dollars in the blink of an eye.
How does wire fraud work?
Gresty: There are two common scenarios where wire transfer fraud occurs. The first one is between the settlement company and the lender – the criminal penetrates the settlement agent’s system and, posing as the settlement agent, sends “new” wiring instructions to the lender. The second is between the seller and the settlement agent, where the criminal spoofs the seller’s email and sends “new” bank account information to the settlement agent. In both cases, if the counterfeit wiring instructions are not discovered prior to funding, the money will be transferred to the criminal’s bank account and re-routed to offshore accounts. On top of the lost funds from a fraudulent wire, a victimized lender may have to contend with other costs, including 100+ hours of investigation time, and litigation fees.
How can you prevent wire transfer fraud?
Gresty: Having a confirmation process is key. Whether the wire transfer instructions are coming from a trusted familiar party or a new party, it’s important to verify any new wiring instructions received. For instance, this verification process can involve verbal communication using a telephone number which has been verified to be associated with the other party. While this option is effective, it can also be time-consuming and resource-draining if the recipient party is not available to answer your call in a timely manner. Alternatively, a Commercial Bank Account Verification service can often provide an instant validation of bank account ownership and account status to avoid delayed funding. This service can automatically identify inaccurate input and fraudulent account number manipulation without the need to wait for anyone to verify manually.
What are some red flags of wire transfer fraud that lenders can look out for?
Gresty: To start, lenders should be wary of last-minute wiring instruction changes. Additionally, if the account holder that you’re trying to confirm with only wants to communicate non-verbally, like via text message or email, or will only make an outbound call to you to verify the wiring instructions, that is a big red flag. You should be able to confirm wiring instructions with the other party by calling them using a known phone number for that party, not a phone number on an email or the wiring instructions.