- Must advise our clients that we will not provide or change wire instructions by email;
- Must advise our clients to confirm wire instructions with us in person or by telephone before wiring funds;
- Must advise our clients to check our website to confirm that the phone number in any email they receive is actually our phone number;
- Must warn our clients not to accept email wire instructions from anyone else, such as a real estate agent; and
- Must not wire funds without confirming wire instructions in person or by telephone using a verified number.
Use of the telephone can help prevent many email-based frauds. But remember – fraudulent misdirection of funds was perpetrated long before email existed and is still accomplished today – by telephone. As title agents become more careful with emails, some fraudsters have returned to using “old fashioned” methods to steal funds.
Here are a few ways such frauds take place:
- No email involved. The thief simply calls your office and claims to be the seller or the seller’s real estate agent. Over the phone, the thief provides new wire instructions. You don’t call back the seller at a known number to confirm the new instructions and you wire the funds to a fraudulent account.
- Instead of sending an email to the title agent – who is alert to email frauds – the thief telephones the real estate agent. Posing as the title agent, the thief provides “new” wire instructions to the real estate agent, who passes the instructions along to the buyer. The buyer wires funds to a fraudulent account.
- The thief monitors email traffic and learns of a transaction that is scheduled to close today. You conduct the closing and prepare a proceeds check for overnight mail to the seller. The thief calls late in the business day posing as the seller or the seller’s attorney or the seller’s real estate agent. The thief asks that, instead of mailing a proceeds check, funds be wired to an account for which the thief provides You don’t call back the seller at a known number to confirm the new instructions and you wire the funds to a fraudulent account.
- Many E&O policies provide only limited coverage for thefts of this type and some policies provide no coverage at all. And be aware that most “cyber” policies do NOT cover thefts absent compromise of or intrusion into the insured’s computer system — which has not occurred when the insured simply acts upon information provided over the telephone. As said in a prior Lesson, the telephone can be a weapon. Be careful that it is not used against you. Make sure that you know who’s calling you.
While Lessons From Losses draws upon the claims handling experience of TIAC’s claims counsel, Loss, Judge & Ward, LLP, the circumstances described are for illustrative purposes only. This material is not intended to establish any standards of care or to serve as legal advice appropriate for any particular factual situations. Lessons From Losses also does not create an attorney-client relationship; please consult counsel for appropriate advice regarding the specific circumstances of any claim or transaction.