At some point in your commercial real estate investment experience, you’ll be confronted with the possibility of fraud, including wire fraud. It happens to the best of us. Fortunately, there are patterns and tactics to look out for, which fall under the general heading of white collar crime. Knowing what they are will prevent you from falling for people trying to take your money against your will. Here’s what to expect and how to fight it.
What Is Wire Fraud?
Wire fraud is any kind of fraud involving telecommunications, usually in a situation where one person gives money to someone who asks for it under false pretenses. These days it’s usually via the internet (social media or email). But wire fraud can also happen by phone, fax, and text. It can happen between state, national, and international borders.
Penalties include hefty fines and jail time, specifically $250,000 for individuals and $500,000 for organizations, and up to 20 years in jail.
How and When Does Wire Fraud Happen in Commercial Real Estate?
There are a number of situations where money changes hands in commercial real estate, which unfortunately leaves an opening for hackers or other types of con artists to attempt to intercept that money from the rightful parties.
In the past, scammers had to rely on the phone and might call up a real estate broker or investor promising astronomically high returns in exchange for handing over bank information, or at least big enough rewards to get people to open their checkbooks, before taking the money and running.
Now, fraudsters can find a way into real estate professionals’ email and social media accounts, sometimes without the person knowing, or through routes that seem innocuous at first. Below is an example.
An Example of Wire Fraud in Commercial Real Estate
A frequent scenario, as Wolf CRE mentioned, involves hackers finding an investor or real estate agent’s email address. They’ll send an email asking about transaction details for the recipient’s latest sale or investment.
It might seem legitimate, and the address might be eerily similar to that of a trusted source. But if it’s not the same, or if something in the email seems a little bit off, do not engage, and definitely do not send money.
Now let’s look at how to spot it in a few different scenarios.
Five Ways to Spot and Avoid Wire Fraud
Now that you know what wire fraud is, here are some factors to look out for that can help you prevent it.
1. You don’t know the person asking for transaction details
The person committing fraud might pose as someone you can trust, even someone you know.
No matter the communication format, ask yourself: Why would your real estate agent, or a seller, lender, or anyone else involved in your investments ask an associate or colleague to gather information on your behalf without alerting you first?
If this happens, ask your usual contact first before even considering a reply, and especially before handing over any financial information. Relatedly, someone might be posing as your actual contact. If you’re afraid that’s the case, again, it’s time to ask the person in question directly.
2. The communication references a Society for Worldwide Interbank Financial Telecommunication (SWIFT) number
SWIFT is an international payment network, and a request to send funds to one of these numbers means the money’s destination is overseas. If you’re working on a deal in the United States, and the person you’re buying from (or otherwise working with) asks you to send money via the SWIFT network, think twice before doing so, especially if there’s not a clear reason why their accounts would be international.
3. The request comes via email
As a general rule, never send confidential information over email. There is an exception if you can confirm that the email service is encrypted, but proceed with caution anyway.
Also, if an email seems suspicious — even if the email address appears to match one of your clients, colleagues, or other associates — check with the person in question first. It bears repeating and can save you a lot of trouble in the long run.
4. Delete emails and change website, email, and other internet passwords regularly
The less time information sits in your inbox, the better, especially when it comes to digital security and preventing wire fraud. Same thing with passwords. If those committing wire fraud can’t get ahold of your passwords, they’re less likely to get to you.
5. If you do wire money, contact your recipient via phone first
Confirm via phone, not email, that the numbers you’re sending the funds to are in fact theirs. As we’ve mentioned before, when it comes to security and verification, direct confirmation, especially by phone, is your friend.
Don’t Be Scared, Do Be Prepared
Wire fraud may be common, but that doesn’t mean you’re going to be a victim. By prioritizing information security and maintaining a healthy dose of skepticism, you’ll be able to protect your assets, and yourself. Also, be sure to watch out for ponzi schemes in commercial real estate.