Email and Cyber Fraud

Trident was directed by email to wire the settlement proceeds. At the closing, an email was received with revised wiring instructions. The Closer immediately consulted with the Seller, who was present, and was advised the email was fraudulent. No monetary loss resulted. In an identical situation at another title company, a new staff member did not verify the change with the Seller. Fortunately, the agency owner learned about the changed instructions and immediately called the seller, discovering the fraud. The agent called its bank immediately and his bank in turn contacted the bank where the wire had been redirected. The agent called only 90 minutes after the wire was sent, fortunately, the fraudster’s bank was a large bank which doesn’t allow large incoming wires to be immediately wired out. It took three days and two sleepless nights before the scammed agent received confirmation that the wire had been reversed. No loss was incurred.

Agent (not Trident) received instructions to wire seller’s proceeds to a third party because the funds were being used for the renovation on another property Seller was buying. Agent pushed back and said proceeds would only be wired to seller’s account. Then an email was received that included a signed, notarized letter that appeared to be from the seller, which provided wiring instructions to an account that was allegedly seller’s account. Agent closed and arranged the wire as detailed in the notarized letter. A week after closing, seller contacted agent stating he had not received funds from closing. Over $23,000 was lost. Agent paid its $5,000 E&O deductible, and apparently the E&O carrier paid out the loss. However, most E&O coverages specifically include this kind of fraud, known as “spoofing”.

Agent (not TRIDENT!) issued a check to the seller at closing for over $218,000. The following day, agent received an email from the seller’s realtor (or so the agent thought) to wire the funds to the seller’s trustee account. Agent stated that to comply, first the check issued at closing must be returned, and the “realtor’s” next email indicated that the check had been shredded. Agent stopped payment on the check, and wired the funds as requested in the revised instructions. Seven days later seller attempted to deposit the title agent’s check and found out about the stop payment. When seller contacted the agent, she was told about the email from the seller’s realtor requesting the wire. Seller and her realtor confirmed that niether had sent an email instructing the agent to wire proceeds. The agent contacted law enforcement, the agent’s bank, the bank where the wire was sent, and the agent’s E&O carrier. As of this writing, this matter has not been resolved and the outcome is unknown. However, most law enforcement agencies will simply refer this to the FBI, which may or may not be able or willing to investigate. Banks generally will refuse to reimburse the sending bank if the fraudster cleans out the funds from the fraudulent account. E&O generally doesn’t cover this type of email account “mimicking”. This really is a worst case scenario – if the title agent can’t make good, the funds are truly gone.