When you hear “Covid-19” or “shelter in place,” you probably do not immediately think of a rise in risk for electronic fund transfers. However, it appears that bad actors remain very busy and risk is going up for the unwary. Parties to real estate and business transactions are not meeting face-to-face, business is being conducted ever more remotely, and people are getting increasingly comfortable using the electronic infrastructure to transact business. But hackers and scammers apparently are increasingly busy taking advantage of the changing situation as well. We have been hearing concerns about this from intelligent and capable clients who have fallen (or nearly fallen) victim to this and in the press. (For example, see the story titled New Coronavirus Concern: Digital Real Estate Scams by Louis Hansen in the June 15, 2020 edition of the San Jose Mercury News at https://www.mercurynews.com/2020/06/15/new-pandemic-concern-digital-real-estate-scams/)
The point we wish to make is simple: now is the time to have your guard up, more than ever before! The fraudulent ploy by the bad actor is often triggered just as the transaction is in its final stages, with time deadlines and an apparent need to act immediately, which only increases the pressure on the party required to send funds. The trick often involves a last-minute change in the wire instructions for apparently legitimate reasons. Do not let the pressure of the moment to get a transaction to the goal line lead you to relax on the due diligence you should perform before initiating any electronic funds transfer.
A few things to consider doing, and to watch for, are:
ALWAYS VERIFY WIRE INSTRUCTIONS with the recipient prior to initiating a wire transfer to a new address. Know who you are sending money to. Reach out and contact the recipient and as mentioned below, use a different mode of communication for verifying information.
USE A “TWO FACTOR” FORM OF VERIFICATION before initiating a wire or ACH transaction to a new address. Do not rely entirely on standard email communications. Call a known phone number to verify the recipient’s information. Talk to someone you know is involved in the transaction from the recipient’s end.
NEVER RELY on email communications purporting to change wire instructions at the last minute. Parties to a transaction rarely change wire instructions during the course of a transaction. Check out thoroughly any last-minute changes in wire instructions. In our experience, title and escrow companies do not normally make last minute changes in funding procedures so, if your matter is going through an established escrow or title company, be especially wary if last-minute changes in the recipient’s account are made.
Whether you are involved in a transaction for the purchase/sale of real estate, business assets or a company, or working on investment or financing activities, caution should be employed before initiating any electronic funds transfer. Once initiated, the transfer may be hard or impossible to undo and if you initiated the transfer you may have little recourse against anyone except the scammer, who will be especially difficult to find or recover from.
This blog is written as of June 23, 2020. Recommendations and legal requirements are changing rapidly, so please continue to review our legal updates or review postings on relevant government websites.
All blogs on this site are for educational purposes only, do not constitute legal advice or opinion, and should not be applied to your situation, or any specific situation, without consultation with counsel. Strategy Law, LLP does not provide any legal advice concerning any matter discussed in a blog except upon formal engagement including, without limitation, execution of Strategy Law, LLP’s formal legal services agreement, and with respect to specific factual situations. No blog constitutes a guaranty, warranty, or prediction regarding the result of any legal matter discussed in the blog or any representation.