Protect Yourself Against Wire Fraud!

I hope this week finds you well. It’s time for another tip that can save you, or someone you know, literally thousands of dollars. That’s why I write these - to share anything and everything I know that will save you time, money, and drama when running your business.

Last week, I shared the Most Common Mistake Small Business Owners Make and How to Fix it! This week is about wire fraud and how to protect yourself. According to the FBI’s IC3 (Internet Crime Complaint Center), in 2019 $3.5 billion were lost due to wire fraud scams.

This number is expected to be even higher for 2020/2021, due to COVID-19 related rise in online transactions. Read on to see how to protect yourself from falling into this trap!

TRUE STORY

I do A LOT of real estate consulting/accounting since many of my clients are real estate investors. They are constantly in the process of buying, selling, and refinancing properties. Although this story is from an actual real estate transaction, you can be a victim of wire fraud anytime you receive a request to wire funds, regardless of what you are purchasing.

This investor was in escrow to purchase a property. About 2 -3 days before the close of escrow, he received an email (supposedly from his real estate agent) with the subject line “URGENT: New Instructions For Wiring Your Closing Funds.” This is VERY common. Things frequently change at the last minute in real estate transactions so this was not a red flag for him.

He wired the $150,000 as instructed in the email. A day or so later his agent asked him why he never wired the funds and told him he was about to lose the property because he never paid the balance due. Ultimately, he lost the $150,000 AND the property and is still one of the 400,000+ cases the FBI is investigating, nearly two years after the fact.

THE PROBLEM

The real estate agent’s email was hacked, and the scammer intercepted the REAL closing/wire instructions with false ones, diverting the funds to their account. THIS IS SURPRISINGLY COMMON AND EASY TO DO FOR AN AVERAGE HACKER! This is not a super high-tech crime! Many people have such poor internet security habits (more about that in a future email) that it’s almost like taking candy from a baby!

THE SOLUTION

The simplest, lowest-tech solution possible - pick up the phone and VERBALLY verify the wire instructions directly with the person requesting them! If you don’t know and trust the requestor personally, make sure you independently get a phone number (for the real estate agency, or title company, or business) and do not just rely on the phone number that you get via email, as that phone number may be part of the scam. Speak to someone in the accounting department if possible (always get a name and note this in your records), and make sure you have them read the wire details to you, not the other way around.

I hope this helps you now, or in the future! Please forward to anyone you think can benefit!