Email Compromise Scams Cost Us Billions Every Year

Real estate tricks account for biggest chunk of email compromise scams: Internet Scambusters #831

Email compromise scams – the term sounds complicated but they’re just a nasty way of tricking people into redirecting huge sums of money into to the hands of crooks.

And they’re costing a fortune to people involved, particularly in the real estate business, from home buyers through law firms to title companies.

The crime is multiplying fast but by putting in place a few safety checks, you can stop it – as we report in this week’s issue.

Let’s check out today’s…


Email Compromise Scams Cost Us Billions Every Year


Email compromise scams, in which crooks try to trick firms and individuals into redirecting payments to scammers’ own bank accounts, have rocketed by as much as 2200% in the past couple of years.

According to new figures from the Internet Crime Complaint Center (IC3), there were more than 78,000 incidents between October 2013 and the middle of this year, costing firms over $12.5 billion. But the last two years have been far and away the worst.

Most of the money ends up in China or Hong Kong, although the scammers’ locations also include the UK, Mexico, and Turkey. Overall, fraudulent transfers have also been tracked (bot not traced) to 115 countries.

One of the crooks’ main targets is the real estate sector, including title companies, law firms, real estate agents, buyers, and sellers. Crimes in this category have soared eleven-fold in just the past couple of years and the value of losses has gone up twenty-two-fold.

“Victims most often report a spoofed email being sent or received on behalf of one of these real estate transaction participants with instructions directing the recipient to change the payment type and/or payment location to a fraudulent account,” IC3 explains.

The recipient, in this case, is often a home buyer or their representative, who is asked in one of these fake emails to wire their money — whether it’s a down payment or the entire cost of the house — to what seems to be a title or escrow company.

“The funds are usually directed to a fraudulent domestic account which quickly disperse through cash or check withdrawals,” IC3 adds. “The funds may also be transferred to a secondary fraudulent domestic or international account. Funds sent to domestic accounts are often depleted rapidly, making recovery difficult.”

Money Mules

Worse still, the scammers are now also roping innocent individuals into helping them commit these crimes. They use these individuals as “money mules” — people who believe they’re working for legitimate businesses in receiving and transferring the stolen money abroad.

The crooks have at least two other tactics for stealing money from firms.

They either send an email pretending to be from a firm’s supplier or a client asking for payments to be sent to a new account number, or they hack employee accounts and send messages to the firm’s payroll department, again claiming they changed their bank account and asking for wages to be send to the new account. They may also ask for other confidential employee information.

IC3 says the best defense is to always verify all requests for a change in payment arrangements and to double-check if you are asked to wire a payment instead of sending a check. Many title companies have already started doing this.

Whether you’re an individual or small business, you should always be wary of email-only communications. Any request to transfer money should always be double-checked with the real intended recipient.

“Be mindful of phone conversations,” IC3 adds. “Victims have reported receiving phone calls from (scammers) requesting personal information for verification purposes…

“Some victims report they were unable to distinguish the fraudulent phone conversation from legitimate conversations. One way to counteract this fraudulent activity is to establish code phrases that would only be known to the two legitimate parties.”

If You’re a Victim

If you fall victim to one of these crimes, acting quickly is crucial.

First, you should contact your bank or other financial institution that you drew the money from and ask for a recall of funds.

Second, get in touch with law enforcement, ideally your local FBI office, and tell them about the fraud. They may be able to work with your bank or lender to get the money back.

Third, file a complaint with IC3 (www.ic3.gov or, if you’re in business, bec.ic3.gov). They also will work with the bank and law enforcement to try to get your money back.

Another Business Scam

Just enough space left to highlight one more business-related scam, this time targeting individuals who’ve just started up their own firm, often a home-based, one-person business.

In this case, crooks identify these individuals online, via social media for example, and contact them saying they need a business license.

In most cases, this is likely to be true. But if you need a business license, you should contact your city or county administration. Usually, they cost between $50 and $100 a year but the scammers are after much more.

Beware of emails and phone calls demanding payment or offering consultancy services to help you get a license, as if it’s a difficult task.

Whether we’re talking about email compromises or a phony business license service, the message is the same — always independently verify whatever you’re being told.

Alert of the Week

Are you worried about “porch pirates” — the crooks who drive around neighborhoods looking for and stealing packages that have been delivered and left by your front door?

It’s a fast-growing crime that’s prompted several interesting solutions that could prevent you from losing out to these nasty characters. These include lock boxes and depots where you can collect your packages.

For more anti-pirate strategies, check out this article from PC Magazine: How to Protect Your Front Door Deliveries.

That’s all for today — we’ll see you next week.