As the country’s leading independent title insurance underwriter for the independent title agent, Alliant National has a responsibility to help confront the growing threat of fraud in our industry. One way we do this is through our Crime Watch program, which incentivizes agencies to report instances of fraud that they encounter. As part of the program, firms that prevent a fraudulent transaction that was to be insured by Alliant National may be eligible to receive a reward of $1,000.
Coffelt Title – An Active Partner In Fraud Detection
Coffelt Land Title, Inc., a title insurance agency that does business throughout Missouri and Kansas, recently detected three instances of fraud, and submitted them to Alliant National for award consideration.
Jessica Wackerman, who works at Coffelt as a title searcher and examiner, noticed a potentially fraudulent transaction while examining a series of files on three properties involving one buyer. “Looking at all of them together, I noticed some issues with the deeds as far as the same formatting, the spelling of grantor and grantee names, as well as notary names,” she said. “I then did some digging and found lots of issues – such as finding death information on one individual.” After noticing this and collecting the requisite information, she quickly notified her contact at Alliant National and sent in copies of the deeds and commitments.
Taken together, these various properties represented a potential fraud amount of nearly $20,000, pointing to the importance of vigilance when it comes to detecting and reporting fraud. As Jessica explains: “Alliant National’s Crime Watch program is a great thing for the agents and underwriter. It protects everyone, but it also ensures that the agents are looking into anything that might seem a little suspicious. The incentive is a nice reward for doing the research to produce all the information.”
Of course, no single program can entirely prevent or mitigate a problem as endemic as real estate fraud, which is why agencies must take other steps to protect themselves and the customers they serve. Coffelt Title itself has taken that idea to heart, investing in staff training and education to help employees catch fraud before it is too late.
Alliant National Is Making A Difference In Fraud Prevention
“I think all title companies need to be more aware of the fraud that is happening in their markets. They should not act under the assumption that it won’t happen to them or their customers,” said Jessica when asked about fraud in the title industry.
We couldn’t agree more, which is why Alliant National launched the Crime Watch program in the first place. Over the past year, we have seen the program pay off in spades. In 2022, Alliant National agents, through this program, collectively reported to us 12 instances of attempted fraud, totaling a potential liability amount of $1.8 million. In recognition of these agent sleuths, we have issued $12,000 in awards. We’re proud of our agents’ efforts to combat this systemic problem in the industry and, as this year draws to a close, would like to thank the following Crime Watch award recipients for making title insurance a safer and more sustainable field:
- Siesta Title Escrow and Services LLC | FL | Amanda Pertuch
- Title Professionals of Florida (TPF) | FL | David D. Lanaux
- Alliance Nationwide Title Agency, LLC | MO | Daniel Onwiler
- Alliance Nationwide Title Agency, LLC | KS | Ben Chapman
- Siesta Title Escrow and Services LLC | FL | Claire Hooper
- Coastal Title Services | FL | Brianna Steel
- Legacy Title & Escrow, LLC | FL | Kathy Morgan
- Caldwell County Abstract and Title Company, LLC | MO | Megan Eitel and Amanda McGinley
- Sunrise Title Services | FL | Adaliz Alvarez
- Coffelt Land Title, Inc. | MO | Jessica Wackerman
- Coffelt Land Title, Inc. | MO | Jessica Wackerman
- Coffelt Land Title, Inc. | MO | Jessica Wackerman
- First International Title | FL | Natia Johnson
Learn more about Alliant National’s Crime Watch program
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.
You can learn more about identifying and preventing fraud by downloading Alliant National’s white paper – Escrow Fraud/Social Engineering: Recent Schemes and Prevention Tips.
Escrow Fraud/Social Engineering: Recent Schemes and Prevention Tips, Alliant National Title Insurance Company
Email cyberattacks increased 48% in first half of 2022, Security Magazine: https://www.securitymagazine.com/articles/98145-email-cyberattacks-increased-48-in-first-half-of-2022
FBI – Business Email Compromise: https://www.fbi.gov/how-we-can-help-you/safety-resources/scams-and-safety/common-scams-and-crimes/business-email-compromise
FBI – Internet Crime Complaint Center (IC3): https://www.ic3.gov/
October evokes many things: skeletons, ghosts, pumpkins and, of course, Halloween. Yet for anyone wanting their workplace to operate efficiently and safely, October should be known for something else:
This 31-day period is a perfect reminder for businesses to review and, if needed, revise their cybersecurity strategy for the year ahead. Let’s learn more about this awareness month and how you can seize the moment to fortify your company’s cyber approach.
Where it All Began
Cybersecurity Awareness Month started in 2004 when the U.S. Congress gave October that official designation. Today, the Cybersecurity and Infrastructure Security Agency (CISA) and the National Cybersecurity Alliance (NCA) lead a collaborative, public-private effort to raise cybersecurity awareness nationally and internationally.
Each year, Cybersecurity Awareness Month initiatives are organized under a different theme, with 2022’s being “See Yourself in Cyber” – an urgently important message. It advocates for people to stop seeing cybersecurity as an inaccessible topic for the select few and instead view it as something in which everyone can play a role.
Four Main Pillars
According to CISA, beginning to “See Yourself in Cyber” involves acting on four key priorities, some of which we’ve already discussed on this blog:
By taking these basic steps to protect your information and privacy, everyone can gain more ownership over their online life and prevent costly incidents.
Become a Cybersecurity Paragon
The silver lining when talking about cybercrime is that more attention is being paid to cybersecurity these days. A trickledown benefit of this enhanced awareness is that more resources are now available that can help even those unfamiliar with cybersecurity improve their firm’s digital defenses.
One such example are the efforts of the CISA. Each year during Cybersecurity Awareness Month, CISA invites interested parties to join them as “cybersecurity partners.” Those that do receive a toolkit with everything they need to audit their own security posture and raise awareness within their company and industry. Elements of the toolkit include cybersecurity 101 presentations, tip sheets, content assets and much more.
Visit CISA’s website for more information and to sign up as a cybersecurity partner.
You Can Prevent Cybercrime
Do you remember seeing those U.S. Forest Service ads where the iconic Smokey the Bear would proclaim, “Only you can prevent forest fires”? You don’t have to be a marketing whiz to see the beauty of that campaign. Simple, direct and powerful, it outlines the essential role we all play in preventing a widespread problem that can carry a terrible cost if it goes unchecked.
The same message holds true for cybercrime. A ubiquitous problem that can lay waste to individuals, businesses and even entire communities, cybercrime is nothing to joke about. If you’re a small business owner, for example, one bad attack can threaten your longevity as an enterprise.
But instead of becoming intimidated and reactive, events like Cybersecurity Awareness Month can inspire us to become empowered and proactive. We can all choose to “See Ourselves in Cyber” and take action to create a safer digital community.
Fraudsters continue to seek out legitimate businesses they can use as a cover for illegal schemes that attempt to separate people from their money. One of the fraud scams that has reemerged is the check fraud scheme.
The claims team was recently notified of a scenario involving an Alliant National agent. A new purchase agreement and a sizeable earnest money deposit cashier’s check was presented to the agent. The cashier’s check was from a foreign bank and was promptly deposited by the agent into their escrow account. Shortly after depositing the check, the buyer notified the agent that the transaction was cancelled. The buyer demanded the agent promptly return the funds through aggressively worded emails and continuous phone calls. The agent did the right thing by not allowing the purported buyer to usurp the procedures that the agent already had in place. Ultimately, the foreign bank confirmed that the cashier’s check was fraudulent, and the purported buyer ceased any further efforts to communicate with the agent.
A few Red Flags from the transaction included:
- A foreign buyer,
- For sale by owner transaction,
- No real estate agent utilized in the transaction,
- Use of non-standard real estate purchase and sale agreement template,
- Termination of the purchase and sale agreement was quickly sent to the agent after the check was deposited, and
- An aggressive stance is taken by the buyer requesting that the funds be returned.
Appropriately, the agent did not rush the process, notified the purported foreign buyer of their check verification process, independently researched and located contact information for the foreign bank, confirmed the validity (or lack thereof) of the cashier’s check with the bank, and waited for confirmation from the bank on whether or not the funds cleared the account.
For a foreign bank’s check, it is important to remember that it may take several weeks for funds to clear an account. If you act and return funds too quickly, the buyer’s original check may be returned due to insufficient funds. If you attempt to try and recover the funds from the buyer, most likely the buyer will refuse to return the money or the buyer can no longer be located. Then, the agent is left without those funds in their escrow account, which will lead to other issues.
It is critical to stay alert and continue to recognize this and other fraud schemes before fraudsters visit your office. You can learn more about identifying and preventing fraud by downloading Alliant National’s white paper – Escrow Fraud/Social Engineering: Recent Schemes and Prevention Tips. This 23-page guide was also referenced in our recent #AllNatAdvantage post titled The #1 Tool For Recovering Diverted Funds: Your Wire Fraud Response Plan.
In addition, here are a few other resources that outline a similar check scam:
If you have questions, please contact the Alliant National claims team.
The cost of fraud to title and settlement services companies far exceeds the actual face value of a fraud incident, according to the 2022 LexisNexis True Cost of Fraud Study released recently.
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.”
We encourage agents to continue to explore and implement best practices as we all work together to combat fraud. Download our white paper – Escrow Fraud/Social Engineering: Recent Schemes and Prevention Tips – today to begin your own internal assessment.
To view the full LexisNexis study, click here.