Liability for Wire Fraud Schemes Targeting Real Estate Closings

Credit unions and their members continue to be victimized in a wire transfer fraud scheme designed to steal the funds needed to close real estate transactions. Purchasers intending to pay for the property using their personal funds are particularly vulnerable to this scam. Upon finding an upcoming closing, fraudsters send a spoofed email containing “updated wire instructions” to the credit union / lender or the member/purchaser.

If the member/purchaser is targeted and they wire their personal funds for the closing using the updated wire instructions, they may attempt to hold the credit union liable if the wire cannot be retrieved.

Misdirected wires have been the subject of litigation involving fraudulent wire instructions for real estate closings, which is related to the business email compromise scam. In this scam, fraudsters hack title company/closing agent’s email to search for upcoming real estate closings. When they find one, they frequently send a spoofed email to the purchaser containing “updated wire instructions” for the closing. (Alternately, the fraudster could send the fraudulent email from within the compromised email account).

Believing the updated instructions to be legitimate, the purchaser provides the wire instructions to their financial institution to execute the wire. Upon discovery of the fraud, the purchaser’s financial institution is generally unable to recover the funds from the beneficiary bank. The purchaser could file a lawsuit against the beneficiary bank or their own financial institution to recover the funds.

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