News and Information
April 27, 2015

Fraud Alert for Lawyers Closing Real Estate Transactions

Last week, the North Carolina State Bar received multiple reports of fraudulent activity relating to wired funds in real estate transactions, some of which resulted in losses as high as $200,000. We are reporting this alert as a precaution but have not heard of any activity in Virginia.  Here is what we understand to have occurred:

On a closing that took place on a Friday morning, before funds were disbursed, the firm received an email and a phone call from a woman purporting to be the out of state seller, requesting the firm to wire funds to her bank account. The following Monday, the firm learned that the seller’s email was compromised and bad actors had inserted themselves in her place. The firm attempted to retract the wire and later discovered that the bank did not retract the wire and will not communicate further without a subpoena.

This firm had two-level confirmation practices in place to protect against fraudulent wires, but the hackers emailed and called the firm to confirm the wiring instructions as was required. The hackers gained access to the email account of one of the parties to the transaction and learned the necessary information in order to assume the identity of one of the parties and initiate the fraudulent transaction. Another defrauded firm noticed after the fact that the email address of the hacker was different from the actual seller's email address by one letter.

One suggestion to protect against this fraud is for the lawyer to initiate the phone call to the actual client or party to confirm the party’s purported wiring instructions, calling only the phone number listed in the client file, even if a different number is provided via email. Please be vigilant when communicating with email and consider whether your firm's wiring procedures are strong enough to detect and prevent these fraud attempts. If your firm has been the subject of an attempted or successful fraud, or have any questions or concerns please contact the ethics hotline at ethicshotline@vsb.org.

Updated: Apr 27, 2015