March 20, 2024
Needham, MA--The FBI’s Internet Crime Complaint Center (IC3) reported on March 7, 2024 that it received 21,489 business email compromise (BEC) complaints in 2023 with adjusted losses of more than $2.9 billion
Cybercrime is up in nearly every category, but BEC remains one of the costliest types of cybercrime, as it preys on businesses and individuals performing fund transfers, with real estate transactions one of the most vulnerable targets.
According to IC3, cyber criminals attempt to compromise legitimate business email accounts through social engineering or computer intrusion techniques to conduct unauthorized transfers of funds.
Fraudsters have become more sophisticated in recent years, according to the FBI. A more recent tactic involves the fraudsters using custodial accounts at financial institutions for cryptocurrency exchanges or third-party payment processors, where funds can be dispersed more quickly, making it more difficult to recover diverted funds.
IC3 has noted that these new tactics make it more imperative for participants in the real estate sector to employ two-factor or multi-factor authentication as an additional security layer.
In addition, the agency suggested the following:
- Create procedures to verify payment requests outside of email communication
- Advise partners to use pre-verified phone numbers, rather than contact info in an email
- Teach clients the basics of phishing and spoofing and how to identify fraudulent emails
- Remind homebuyers and sellers to never click on unknown links in an email or text
- Warn participants that they will never be asked to update or verify account info via email
On the upside, there are steps everyone involved in the real estate transaction can take to protect the client’s funds.
Success is measured in minutes
In 2023, IC3’s RAT initiated the Financial Fraud Kill Chain (FFKC) on 3,008 incidents, with potential losses of $758.05 million. A monetary hold was placed on $538.39 million, representing a success rate of 71%.
Successful recovery of funds in these cases is highly skewed to those who report wire diversions immediately. Time is critical. If you suspect an attempted or confirmed wire fraud, IC3 advises:
- Never make any payment changes without verifying with the intended recipient
- Contact the originating financial institution as soon as fraud is recognized
- Request a recall or reversal and a Hold Harmless Letter or Letter of Indemnity
- File a detailed complaint with ic3.gov
While the overall number of complaints to IC3 each year has remained fairly consistent across all the diverse types of cybercrime, the monetary losses have tripled in just four years, from $4.2 billion in 2020 to $12.5 billion in 2023. It is an unfortunate reminder of how critical it is for all of us who touch a real estate transaction to stay alert for any red flags in the transaction that could indicate a fraud is afoot.
At Kriss Law/Atlantic Closing & Escrow, we remain committed to educating our clients about the tactics fraudsters use to insert themselves into the real estate transaction. And we do our part to ensure the transfer of information and funds is safe and secure throughout the transaction process. Contact us today to learn more about our efforts to fight fraud in real estate transactions and to learn more about our services and expertise.
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