Question: How prevalent is wire fraud in today’s real estate environment?
“It is more prevalent than you might imagine, and it absolutely has been getting worse,” said Tom Cronkright, co-founder and executive chairman of CertifID, an Austin-based technology platform designed to safeguard electronic payments from fraud.
According to the recently published “2024 State of Wire Fraud Report” from CertifID, nearly one-quarter of consumers who recently engaged in real estate transactions were targeted with suspicious or potentially fraudulent activities. The report cited FBI data that determined compromised business emails in real estate impacted 2,284 victims in 2022, resulting in $446 million.
The report also noted that today’s homebuyers have a 1-in-20 probability of being hit with wire fraud during a property closing – in comparison, the probability of being injured in a motor vehicle accident is less than 1-in-200.
And this raises another question: Who are these fraudsters that are pulling these schemes?
“I think there’s two sides to this coin,” said Cronkright. “The first appears to be internationally orchestrated bad actors – either syndicates, cartels, possibly nation-states – and those appear to be the organized crime layers that are deploying the strategies and resources that lead to somebody being convinced they’re going to wire funds to do an individual or a company they believe is a trusted party.”
Cronkright added, “And then it shifts quickly to a domestic network, when it comes down to money mules and money launderers that have accounts open that are ready to receive those funds when they’re transferred. We’ve seen it in both a lot of ways – the emails that are being sent from overseas that are enticing and are influencing socially engineering, but then it goes domestic really quick when there’s an indication somebody’s going to send funds.”
The CertifID report highlighted that 51% of consumers were either somewhat or not aware of wire fraud risks in real estate transactions – but only 29% of respondents to the report’s polling believed it was their responsibility to get educated in wire fraud.
Cronkright urged realtors to raise the subject of wire fraud with their clients.
“Just because you don’t handle money doesn’t mean you won’t have some form of liability if a client that you represent loses money due to wire fraud in a transaction that you’re involved in,” he said. “What real estate professionals can do is educate and engage their customer around the issue of wire fraud – their life savings could be at risk.”
And if a wire fraud attack occurs, Cronkright stressed it is essential to act quickly to prevent the pilfered funds from being lost forever.
“When I say act quickly, it’s like a today or tomorrow situation, unfortunately,” he continued. “One of the things that we have seen in the last 24 months was this time compression of the movement of money – money always moves from one domestic account to another domestic account and is then to a bank in Hong Kong or in mainland China or directly to Bitcoin.”
Cronkright recommended making immediate contact with both the initiating bank and the receiving bank in the transfer and identifying the format of the transaction – a real-time payment, a wire or an ACH. Law enforcement also has to be brought into the picture.
“There are some state or county level investigators that will roll their sleeves up and help victims, but in most cases it becomes a federal case because it crosses state lines,” he said. “And now you’re dealing with the Secret Service, FBI, those types of institutions.”
In today’s real estate environment, wire fraud often involves scammers posing as trusted real estate professionals. The most recent data showed that 22% of fraudulent communication appears to come from the victim’s real estate agent. Cronkright warned that cutting-edge technology can add a new wrinkle to this chicanery, making a bad situation worse.
“AI has so quickly been deployed into this landscape,” he said. “First, we saw it show up with platforms with the ability to spoof where the call or a text message is coming from, and then that was layered in with AI voice replication. If we play our conversation back, if I had just 10 seconds of your voice I could put it into a multitude of programs now and I could get that voice to say whatever I want. And then I could just drop it into voicemail instructions that this is so-and-so from the title company or your transaction coordinator for the real estate brokerage. AI is going to cut through some of the assumptive layers that we have about identity confirmation. The use of these technologies is going to further challenge how we think about confirming someone’s actual identity, not verifying an AI a piece of ID.”
