The Federal Bureau of Investigation (FBI) has labeled business email compromise (BEC)/email account compromise (EAC) as “one of the most financially damaging online crimes” as it is “the top cyber threat.” BEC/EAC is a scam in which fraudsters trick an unsuspecting party, typically by using a variety of social engineering and phishing tactics, into making payments to fraudulent accounts.
Since 2016, over $43 billion has been lost through BEC/EAC attacks. In 2021, U.S. losses attributed to BEC/EAC cybercrimes were reported to be almost $2.4 Billion. This is more than one-third of the total cost of all cybercrimes reported to the IC3 in 2021. In a recent article from Security Magazine, the author noted that email cyberattacks have increased by 48% in just the first half of 2022. It is no surprise that the title insurance industry has been the target of fraud schemes for many years, especially with wire transfers being utilized more often.
Some common schemes we continue to see include:
Seller Spoof – fraudsters impersonate the seller (using an email address that may only be slightly different from the original, or using the actual seller’s email), and provide alternate bank account information for the seller proceeds.
Lender Spoof – in a transaction involving the payoff of a prior lender, fraudsters impersonate the prior lender. They often modify the original payoff provided by the prior lender (or create one) with wiring instructions for a fraudulent account.
Buyer Beware – fraudsters pose as the settlement or real estate agent using a similar email address, and instruct the buyer to wire their down payment funds to a fraudulent bank account.
There are many ways to protect a person or a business from becoming a victim of these costly schemes. A few tips include:
Meticulously examine the email address, URL, and spelling used in any correspondence. Fraudsters use only slight differences hoping you do not critically analyze the spelling.
Be suspicious about opening any email attachments from someone you don’t know and be wary of email attachments forwarded to you as they may include malware or other malicious software.
View all changes to wire instruction with extreme caution.
Always independently verify with the company any payments or wires being sent to a third-party by contacting them at a legitimate number, and be leery of any last-minute changes to account numbers or payment procedures.
Confirm with the intended recipient that the wire was received.
Be extremely suspicious if the requestor is pressuring you to act quickly.
If you do become a victim, do not wait to take the next steps since time is critical in this process. Have a plan in place and be prepared to:
Notify your office management.
Notify your financial institution and the recipient’s financial institution.
Contact local law enforcement.
Contact your local FBI field office.
Contact your cyber-insurance, escrow security bond, and error and omissions provider.
File a complaint with Internet Crime Complaint Center (IC3).
Contact your title underwriter.
With our increased dependency on technology and the pace of our industry, we cannot let down our guard – we must stay vigilant! Heed the warning that fraudsters are not slowing down or giving up on these fraudulent schemes. If you are presented with any of these situations, the key is to be able to recognize the scam and then shut it down before it can infiltrate your transaction and create a web of issues.
What does it mean to get hacked? And how might we mitigate cybercrime?
Hacking is unfortunately far from uncommon. By some counts, more than 2,200 cyberattacks occur per day, which means that one cyberattack occurs every 39 seconds.[i] These hacks carry a tremendous financial cost, with some estimates putting them as high as $6 trillion per year or $500 billion per month, $115.4 billion per week, $16.4 billion per day, $684.9 million per hour, $11.4 million per minute and $190,000 every, single, second.[ii]
The figures are mind-boggling and scary, which is why it is more important than ever to understand what can occur when a business network is hacked. Without grasping the basics, it becomes more difficult to assess your risk and start proactively protecting your company.
What is the origin of the term “hacking”?
The use of the term “hacking” in a computer science context began all the way back in the 1950s at MIT. In those days, hacking simply meant dealing “with a technical problem in a creative way.”[iii] It wasn’t until the late 1970s that hacking started to refer to illicit activity, a definition it retains to this day.
These days, hacking primarily revolves around the compromising of digital devices and networks. While there is “ethical hacking,” which focuses on improving security systems and keeping data safe, most is “black hat,” which means that it is often motivated by money, such as:
Wanting to sell private network information on the black market.
Obtaining access to sensitive information and then attempting to coerce victims into paying money.
Desiring to obtain confidential data and use it for financial benefit.
Holding data hostage until a payment is made.
How do hacks occur?
Typically, business networks are targeted through the multiple endpoints that are vulnerable to criminal activity. Just think about it. Every day, employees access business networks with numerous devices that may or may not be secure. But that’s not all businesses need to be concerned about. Similarly vulnerable areas include:
Any cloud-related services
Hacks come in every shape and style
There is no “one way” that hacking occurs, which makes it important to cover the different variations of hacking to gain a more complete understanding of the threat landscape. Here are seven distressingly common strategies that cybercriminals routinely employ:
Phishing: By far, phishing is one of the most popular forms of hacking today – in part because it is so effective. To better understand the prevalence of phishing, look no further than to recent data that shows 1 in 99 emails is a phishing email.[iv] There are several different types of phishing emails, such as:
Malware delivery emails, where malware is unleashed if the email recipient clicks on a malicious link.
There are also credential harvesting emails, where the sender will impersonate someone the recipient knows to get them to hand over sensitive information.
Denial of Service (DoS): DoScyberattacks occur when cybercriminals make an online property or service unavailable by inundating it with requests. This attack will frequently result in your website crashing or becoming unusable.
Spyware: Spyware involves malicious code being embedded to monitor email correspondence or worse. Keying (key-logging) to obtain passwords is just one example.
Malware: You’ve likely heard of malware before – and for good reason. Referring to any computer virus, worm, trojan horse, spyware, ransomware, adware or other malicious software, malware has been sneaking into user devices and business networks since the beginning of the computer age.
Brute Force Password Decoding: In this type of hack, finesse or secrecy go out the window. The cybercriminal simply attempts to force his or her way inside your devices or network through automated tools that seek to decode your network passwords.
DNS Attacks: With Domain Name Server (DNS) attacks, cybercriminals utilize an elaborate strategy where they take domain names and transform them into IP addresses, which often results in the domain name server redirecting web traffic to fake websites controlled by the criminal.
Social Engineering: Social engineering cyberattacks are exceptionally difficult to guard against because they focus on manipulating human attributes like empathy, fear and urgency to gain access to personal information or a corporate network. Phishing is one example of such an attack, but there are many others that fall into this bucket.
Are we powerless against hacking?
With such a wide range of illicit cyber activity, it can feel almost impossible to keep up. However, there are numerous things business owners and employees can do to protect themselves and reduce the possibility of harm or financial loss. From following password best practices, to keeping your systems updated, to deploying new techniques like security awareness training (SAT), even the smallest firm can dramatically increase its security posture. The situation is not hopeless. In fact, by following expert advice and remaining vigilant, we all have the power to reduce our risk profile and stay safe online in both our personal and professional lives.
The 57-page report provides information on current fraud trends in the mortgage, title and settlement industries and details some of struggles companies face in addressing fraud detection, prevention and customer experience.
In terms of the cost of fraud, research indicates that for every $1 lost in an actual fraud incident, the cost to a title company is $4.19 or four times that of the face amount of the loss. The number rises to $5.34 for originators.
According to the research, the additional cost is related to the labor required for fraud detection, plus the expense of investigation, reporting and recovery following an incident.
For title companies, the biggest cost is labor, with the actual breakout of related costs as follows:
35% attributed to labor costs
21% for detection, investigation and recovery
18% related to fines and legal fees
13% covering fees during application and processing
13% accounting for the face amount of the actual fraud
The actual cost is extraordinary, given that title companies reported a staggering 77% increase in fraud over the past three years. The growth in fraud is attributed in part to COVID, as a substantial portion of both mortgage and settlement services transactions moved to online and mobile-only transactions.
According to the LexisNexis report, although fraud originates largely in online and mobile-only transactions, it often the moves to the call center or phone-based point of interaction, which further adds to the risk, with the growth of remote workers handling these transactions.
For title companies working in the online and mobile transaction world, identity verification is the number one challenge.
“The challenge involves assessing digital identity attributes such as email and phone number,” the report states. “That is contributing to challenges with identifying malicious bots and the ability to determine the source of the transaction. Synthetic identities are a key driver of identity verification challenges, particularly among organizations that do not use fraud solutions that assess digital identities and behaviors.”
LexisNexis noted that the mobile channel especially is contributing to the high volumes in recent years.
“This channel brings device-related risks that are unique from online browser transactions (SIM card swapping, malware, SMS phishing). This allows fraudsters to gain entry through anonymous remote transactions at the very start of the mortgage process.”
Title companies walk a bit of a tightrope, determined to invest in strong fraud prevention, while striving to create a positive customer experience. Customers reportedly get frustrated with the passwords, qualifying questions and multiple identifiers it takes to get through the transaction and have been known to give up and drop out of online and mobile device-related processes out of frustration.
Balancing these two necessities of doing business has been challenging, but title companies that put forth the effort can dramatically reduce their exposure to fraud.
To help our agents assess their efforts, Alliant National released a white paper this year, titled Escrow Fraud/Social Engineering: Recent Schemes and Prevention Tips. The white paper provides agents with useful information, risk factors to consider, and practical action steps that will help you partner with consumers, real estate agents and lenders to defend against the fraudsters.
In addition, the LexisNexis report identifies four recommendations agents should consider, including remaining vigilant to increased fraud, increasing the use of technology, creating multi-layered solutions, and integrating cybersecurity and digital customer experience with your fraud processes.
Here are a few highlights from their list of recommendations:
Accelerated movement to online/mobile transactions will continue to grow; therefore, title/settlement companies should continue to buildout and enhance the digital customer experience while protecting against fraud.
Best practice fraud detection and prevention includes a multi-layered solutions approach, and the integration of fraud prevention with cybersecurity operations and the digital customer experience.
Layering in supportive capabilities such as Social Media intelligence and AI/ML further strengthens fraud prevention.
While fraud prevention in the current environment is challenging, the report concludes that “firms which use a multi-layered solutions approach that is integrated with cybersecurity and digital customer experience operations can lower their cost and volume of successful fraud while improving identity verification and fraud detection effectiveness.”
First published in 2017 and fully updated by Alliant National’s Compliance, Risk and Education teams, the paper provides information, tips and suggestions to help you better understand the current threat environment and create a comprehensive plan that addresses the realities we face in our industry.
Time to assess cyberattack risk in light of Ukraine invasion
The paper’s release comes at a critical time as U.S. businesses brace for potential cyber warfare corresponding with recent violence in Europe. The Department of Homeland Security (DHS) issued a bulletin in January warning of the increased risk of cyberattacks in the U.S. as Russia was poised to invade Ukraine.
“We assess that Russia would consider initiating a cyberattack against the Homeland if it perceived a U.S. or NATO response to a possible Russian invasion of Ukraine threatened its long-term national security,” the agency said in the bulletin released to law enforcement partners and obtained by The Hill.
In response, the American Land Title Association warned in a recent blog that the risk of spillover cyberattacks against non-primary targets could become much more widespread.
2022: Growth of BEC/EAC
Against this backdrop of international tension, Alliant National agents continue to report an increase in attempted wire fraud schemes. These attacks are part of a growing fraud threat targeting businesses of all sizes and the general public.
The FBI refers to this threat as Business Email Compromise/Email Account Compromise (BEC/EAC). BEC/EAC fraudsters focus on organizations that perform wire transfers, making real estate especially vulnerable.
According to the FBI Internet Crime Complaint Center’s (IC3) most recent report, the center received a record number of complaints from the American public in 2020: 791,790, with reported losses exceeding $4.1 billion. This represents a 69% increase in total complaints from 2019. Business Email Compromise (BEC) schemes continued to be the costliest: 19,369 complaints with an adjusted loss of approximately $1.8 billion. Phishing scams were also prominent: 241,342 complaints, with adjusted losses of over $54 million.
Protect Your Agency
Given the increased incidence of BEC/EAC scams and ransomware attacks over the past several years, it is imperative that prevention be addressed at every level. State and federal entities, as well as most of the top tech companies are creating alliances and workgroups to stem the tide.
Title insurance companies and agents also have a role to play. Given the current nationwide threat, we encourage all agents and their staff to remain on high alert for attempted fraud, particularly when it comes to seller proceeds. We also urge agencies to remain vigilant regarding possible attempts to obtain consumer or employee PII.
Here are some immediate steps to consider:
Identify the risks your agency faces and make sure your systems are protected
Maintain strict policies and procedures for verification of wire instructions
Educate your staff and consumers about what to do when they suspect fraud
Establish protocols to quickly detect fraud and recover diverted funds
Obtain appropriate insurance, including Cyber Liability coverage
Cyber Security is Mission Critical
There is nothing more important than protecting our clients’ funds and personal information. It is mission critical for a title company to make security its highest priority in 2022. You can begin today to assess your systems and educate your staff to make sure every possible precaution has been put into place. We hope our Escrow Fraud/Social Engineering White Paper will be helpful in this work.
In addition to the release of the White Paper, Alliant National will provide updated materials throughout the year to help agents understand and respond to the threat environment we face. Of course, we’re always ready to discuss the threats we are seeing, and steps you might consider for your business. Feel free to reach out to your agency representative, or any member of the Alliant National team.
The pandemic has amplified the number of scams and email attacks on individuals, companies and organizations. People are already in vulnerable places emotionally, socially, physically and mentally; Covid has only intensified fright and flight instincts. We are constantly interrupted by additional stressors.
What might have easily caught your attention on an invoice, bill or receipt, can now slip by when the mind is overwhelmed with the stress of daily life. The way people receive goods, bills, invoices and confirmations has changed during the pandemic.
Be proactive and take one worry off the list by preparing yourself and educating your clients, friends and family about current email scams. Here are four ways to identify obvious scams when shopping for company or personal resources.
When opening an email, especially one that is unexpected make sure to check the sender address. This can be the first and last stop when identifying a scam. Do you order from Amazon or Office Depot often for your business? Typically, large companies have a very streamlined and identifiable confirmation process. It might have a logo, a reprint of your order, package tracking information, etc.
Most companies have emails such as a “confirmation@” or “receipt@”, and then the company. If your typical confirmation is now coming from a different sender or source, this is a red flag. Most purchases are automated; therefore, an email about a package and confirmation that is not expected or sent at strange times is also a red flag.
The schoolteachers’ philosophy holds true: If it isn’t written correctly, it’s not correct. Many scams originate from outside of the United States and come from people who have never spoken English, or who might have only slight knowledge of English grammar and mechanics. This lack of familiarity with the language or even cultural communication can be extremely evident from the outset of the email. Unusual forms of personal address or improper labels are a signal of deceit.
Legitimate order confirmation emails should be free of spelling and punctuation errors, or words swapped for one another such as “their” and “there.” If you find such an error, take it as a signal that this email is likely a scam.
Many people are already well versed on email scams that direct you to a link. Most know not to click the link. Use this same strategy when reviewing your confirmation and order. You are usually able to scan over the item or photo and it should direct you back to the home site, whether you were shopping on Home Depot, Office Depot or Amazon. If it directs you to another site, and you can confirm this by hovering your mouse over the link, then it’s a scam. Contact your original purchaser immediately.
Most online retailers have the shopping, shipping and receipt process dialed in. Communications are auto-formatted and the email confirmation arrives in a clear, itemized order. Often items – the exact photo of the item and its link – can be found on an email confirmation.
Order receipts or requests for further action that are formatted in a strange manner should raise your suspicion. Are they asking you for additional shipping payments? Did they add your taxes incorrectly and are trying to collect? Do not fall victim to these scams. Your receipt of purchase should be clean, neat and easy to read and reference. If something is strange, then this is an identifier of a scam. In the end, trust your instincts. If something looks off, it likely is. Don’t be afraid to back out of an email or a link that feels like it might be fake. You know when something looks and behaves unlike the norm. Trust that and help yourself and your business stay safe.