As we noted in prior posts on cyber crime and Cyber Risk Insurance (here & here), wire transfer fraud is particularly rampant in real estate transactions, where cyber criminals are after the funds used for real estate closings. In addition to strong cyber security (see prior post here), comprehensive Cyber Risk Insurance (also called Data Breach, Privacy and Network Security insurance coverage) is a critical protection for real estate organizations concerned about cyber crime (incl. wire transfer fraud & social engineering fraud).
According to new data provided for this column by the FBI, in fiscal year 2017, nearly $1 billion ($969 million, to be precise) was “diverted or attempted to be diverted” from real estate purchase transactions and wired to “criminally controlled” accounts.
How does the scam work:
Hackers find an opening into a title company’s or realty agent’s email account, track upcoming home purchases scheduled for settlements — the pricier the better — then assume the identity of the title agency person handling the transaction.
Victims are not limited to title companies or realty agents, and the Washington Post article (see here) misses one important dimension: cyber criminals are also hacking into individual’s email accounts and deceiving them into wiring funds to the criminals, as noted in our prior post on consumer social engineering fraud (consumer phishing fraud or wire transfer fraud, here). Cyber criminals may steal money from a buyer or seller involved in the real estate transaction because they may be an easier target than the real estate organizations involved in a closing and are also involved in the transfer of funds.
Real estate is a prime target because large sums of money are regularly wired by multiple parties, some of which may have vulnerable email accounts, and real estate organizations should take steps to protect themselves and their clients (see our prior post here).
In addition, all real estate organizations should have comprehensive Cyber Risk Insurance in place. Cyber Risk Insurance is an essential coverage for businesses of all sizes for protection from both criminal attacks and employee error, but real estate organizations are particularly vulnerable. Coverages vary widely, and a thorough review is essential to ensure that comprehensive coverage is in place.
Tennant Risk Services is a specialty wholesale broker and underwriting manager, and delivers expertise, markets and exemplary services to our retail insurance agent clients in the placement of professional liability and specialty insurance (E&O, D&O, EPL, Cyber Risk, Specialty). We excel at hard to place accounts.
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