Wire fraud and social engineering fraud targeting title agencies have increased 480% from 2016 to 2017 according to the FBI. These types of fraud often involve a fraudster hacking into emails to redirect wire transfers or tricking title agencies into wiring funds by posing as a trusted source. To prevent fraud, title agencies should train employees, implement strong verification systems for wire requests, ensure proper insurance is in place, promote wire security to clients, and create an incident response plan. If fraud occurs, the incident response plan should be followed which includes contacting authorities and representatives to try to recover funds and limit damages.

1. The Ramblings ofa Title Man
Wire Fraud
Fraud surroundingwires — andescrow security attacksingeneral — hasincreased exponentially in2017. Everyday,it
seemslike we hearaboutanewcase somewhere inthe country involvingafraudperpetratedagainstatitle agencyor
escrowcompany.The FBI reported thatfromthe beginningof 2016 to the beginningof 2017 alone,it sawa 480-percent
increase intitle companiesreportingfraudtothe InternetCrimesComplaintCenter(www.ic3.gov).If all of the fraud
goingon inthe industryrightnowis notscary enough,more thanhalf of all lossesare attributable to employeehuman
error. Before we discussfraudandhowto bestbe preparedtodefendyour agency,we needtounderstandwhat kinds
of fraudare outthere:
Fidelity/Employee Theft Computer Fraud Wire Transfer Fraud Social Engineering Fraud
 Theftof money or
securitiesbyan
employeeactingalone or
inconcert withothers,
regardlessof the method
utilized (Wiretransfer,
checks,cash,etc.)
 Theftof money or
securitiesbyanon-
employeeusingany
computersystem(wire
transfers)
 Theftof money or
securitiesbyanon-
employeeusing
fraudulentwire transfer
instructions transmitted
directly tothe financial
institutionorbuyer
withoutthe agency
knowledge.
 Theftof money or
securitiesbyanon-
employeewhopurports
to be a trustedsource
and successfully induces
an authorizedperson to
sendwire or payment
instructions.
-graphic byLocton, Inc.
The 480-percent rise infraudhas almostentirelybeenof the lasttwocategories:Wire transferfraudand social
engineeringfraud.Here are typical examplesof both:
 Wire transferfraudexample:Fraudsterhacks real estate agent’s email andinterceptswire instructionstobuyer,
thenaltersthemandtransmitsfraudulentwire instructionstobuyer;Buyersendsmoneytofraudster — and
moneyisnowgone.
 Social engineeringfraudexample:Fraudstersendsanemail tothe title agency thatlookslike itisfromthe real
estate agentor trustedparty,and convincesthe title agencytowire fundstothe fraudster’saccount.
If you notice the bigdifference inthese twoexamples, inone of them,the title agencyneverknew the fraudwastaking
place (the wire transferfraudexample);andinthe other,itwasthe title agency that hadpossessionof the funds,and
was trickedintosendingthemtoafraudulentlocation(socialengineeringfraudexample).
How youhandle these situationswill determine your liabilityandyourexposuretoloss. Eveninthe case of wire transfer
fraudthat occurs withoutyourknowledge,titleagencieshave beensuedfornothavingstrongercontrolsoverwire
instructions.
What to do before fraud occurs:
Train yourstaff on industrybestpractices.These include:(1) Educatingemployeesonpreventingfraud;(2) Having
strongverificationsystemsforclientwire requests;(3) Reviewinginsurance tomake sure youhave all available
protectionforthistype of crime;(4) Promotingwire andfundssafetywithyouremail signature,website andmessaging
to clients;and(5) Creatingan incident-responseplan of whattodo whena fraudoccurs.
What to do when fraud occurs:
Followyourincidentresponse plan.Yourplanshouldhave all the phone numbersof whomtocontactfor your bank,the
FBI,your insurance carrier,yourlocal attorneywhorepresentsyouandyourunderwriter. Firstandforemost,contact

2. the bank anddo everythingyoucanto have the moneyreturnedorstopped.Second,reportthe crime tothe authorities,
bothlocal and FBI. Nextconsultyourattorney,notifyyourinsurancecarrierandyourunderwriter.Yourlocal attorney
representingyoumayneedtogetinvolvedtofile arestrainingordertopreventfurtherloss.
It isdifficultforatitle agencyto recoverfroma wire fraudor social engineeringloss.Insome circumstances,youragency
may be requiredtoreplace the fundslostif insurance coverage isnotprovided.Manyagencieslackthe financial
resourcestoreplace a seller’slostproceeds. The damage toyourprofessional reputationmaybe agreatercost, causing
youto lose businesswell intothe future.
For more informationonthe subjectof wire fraudandsocial engineeringfraud,contactthe AmericanLandTitle
Association(www.alta.org) foradditionalarticles,recommendedlanguage togive toconsumerstoadvise themof the
riskand a short videoyoucan provide toconsumerstoeducate them.
“Distrust andcautionare the parents of security.”
BenjaminFranklin,1706-1970, Foundingfatherof the UnitedStates andsignorof the Declarationof Independence,
Firstambassadorto France,FirstUS postmasterandleadingstatesman,inventor,publisherandauthor.