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A title company in New York City was handling a sale transaction in the amount of $3,715,000. The Seller sent her attorney bank wire instructions for the sale proceeds on May 2, 2023. The instructions directed the proceeds to be sent to Bank of America®. The title company closing the transaction never received these instructions nor were they included on any emails when the bank wire instructions were sent from the seller to their attorney.
On May 12, 2023, the title company received bank wire instructions from the seller’s attorney directing seller proceeds to an account at Citibank®. On May 15, 2023, the bank wire instructions were verbally verified with the attorney.
The attorney did not mention to the title company that they received initial wire instructions for an account at Bank of America. Later, the "Seller" (who was a fraudster using a spoof email account) switched the instructions to an account at Citibank.
On May 17, 2023, a wire transfer in the amount of $1,944,378.86 was sent to the account at Citibank by the title company. The seller did not receive their proceeds and called the attorney.
The attorney called the title company to find out where the seller proceeds were sent and during the conversation, he mentioned the wire instructions changed from Bank of America to Citibank during the course of the transaction.
The title company placed a wire recall for fraud. Luckily, their escrow trust account was also a Citibank account, making the transfer a book transfer and not a wire transfer, which is easier to retrieve.
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MORAL OF THE STORY
Remember that fraudsters will communicate and provide fraudulent information to various transaction participants. When verifying bank information received from the seller’s representative, such as his or her attorney, question how the instructions were received, whether the attorney called his or her client to confirm the information, whether there had been any changes to instructions received or if you can call the client directly to confirm prior to wiring funds.
In this case, the seller’s attorney was looking at the bank wire information received from the fraudster, which was in turn sent to the title company. That same bank wire information was used to verify the fraudster’s account when the title company called for verbal verification.
When verifying payoff statements received from a law firm, the bank wire information should be confirmed directly with the actual payoff lender, not the law firm. The law firm might be looking at a payoff statement that was sent to them electronically, which is vulnerable to being intercepted and altered to divert the payoff funds to a fraudster’s account.
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