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Cybercrime Story Part I: True Tales of Fraudsters Preying on Homebuyers

Wealth Planning

Last year, a handful of our clients purchased homes. And two of them came very close to losing almost $1 million to fraudsters.

Buying a home is one of the most expensive purchases you’ll ever make. It’s also one of the most emotional, which makes it ripe for fraud. Below is the story about how we saved two clients from being robbed of a small fortune. (Names have been changed for confidentiality.)

Carl

Over the summer, Carl sent me a short email that said, “Major shake up, we are buying a new house.” Carl and his wife had decided to leave the Bay Area for Idaho. He wanted $500,000 for the down payment.

As is required by Schwab, I called Carl to verify his plans. Two days later, before receiving details about the new home escrow, I received the first email from the fraudster, via Carl’s email:

“Can you please advise you received the Preferred Escrow wire instructions i emailed you with? Please confirm receipt of this email.”

As I later learned, this was the fraudster’s attempt to discover whether I had received legitimate wire instructions. Their strategy is to assess the status and what details I had about the transaction, then swoop in to provide their own banking information. I became suspicious when Carl’s email instructions were to wire funds to Bank of China, HK, with no dollar amount or deadline. I checked Carl’s email address against my records, character-by-character. Since it checked out, I replied to ask for the missing information. My assistant prepared the foreign wire form for my review. At the end of Carl’s next two emails there appeared another concerning request:

“Please advise as i am not available to calls but only email.”

I finally called Carl and learned he did not send the Bank of China instructions. In fact, he had not received any of my emails after the Bank of China email. He changed his email password immediately. Since Carl was overwhelmed with packing for the move, my team contacted the escrow agent directly to get the wire instructions, and we completed the wire transfer form for Carl’s signature.

Laurie

After a call with Laurie about her San Diego home purchase, we strategized a plan for her down payment, to occur in about a month.

Laurie knew and trusted her real estate broker and did not question an email from him with an urgent tone. The email, which Laurie forwarded to me, said, “the full down payment needs to be wired today and held in escrow.” She was surprised by this request.

In this case, the broker’s email footer and photo appeared in the email. The bank name and address looked legitimate, too. But the pushy language (and the grammar) seemed off, especially this request to “Please find our wire instructions below for the wire today. Kindly wire the funds and email me a copy of the wire confirmation afterwards, I’ll need it for our records.”

In my experience, funding occurs at the time of close. Thus, the purchaser has weeks to gather cash. I called Laurie to ask if she talked to her broker. She had not, and a lightbulb went on for her as she realized something was fishy with the tone. Earlier, she emailed her broker, and he responded that he could not talk by phone and requested she send an email. Finally she called the broker, who confirmed he did not send instructions for a wire transfer. His email had been hacked.

How The Scam Works and How to Protect Yourself

A fraudster gets access to an email address (usually via a compromised password) and watches it—sometimes for years—until there is an opportunity to step in, such as when an escrow is opened. Once the fraudster enters the conversation, they divert incoming emails to a hidden folder, which is why neither Carl nor the real estate broker received my emails asking for more details; at that point I was corresponding with the fraudsters.

After a wire goes out, it is nearly impossible to recover the funds. So protect yourself by following strong security measures beforehand: use a firewall, filter spam, avoid clicking links in emails, update software regularly, and do not use free cloud apps like Dropbox. (Note that our firm’s ShareFile portal has the highest level of security and is trusted by many CPA firms.) Also, be sure to follow up by phone after receiving wire instructions via email.

A vigilant team of experts on your side—including financial planners and custodians—can keep an eye out for your best interest from all angles, thereby lessening the likelihood that you’ll get taken for a financial ride.

We will continue to be cautious, and to verify wire transfer instructions with multiple parties to a transaction. Please reach out to us if you have any concerns or questions.

Read Part II of our series, Looking for Love (in All the Wrong Places).

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