Don’t fall for this theft scheme!

This particular brand of fraud might not have struck South Carolina closing attorneys, but similar schemes definitely have! I am passing this one along because it is hitting the direct operations of title insurance companies in other states on a regular basis.

The facts: A buyer contacts a closing office by e-mail only, never by phone or in person. The initial e-mail attaches an agreement to purchase an option on real estate for $95,000. The agreement does not contemplate that title to the property will change hands, only that funds will pass for the purchase of the option.

No real estate agents or attorneys are involved. (Of course, if this happens in South Carolina, the recipient of the e-mail and intended victim will be a closing attorney.) The document is not on a standard contract form, and fonts vary within the document. The word “authorization” is spelled “authorisation” throughout.

The agreement provides:

Escrow holder will release said funds to seller upon receipt by Escrow holder of a written authorisation (sic) from buyer that he is satisfied with the inspection of said premises and will complete the purchase.

The buyer sends a cashier’s check drawn on a credit union in a different state by overnight delivery in the amount of $98,000, which is $3,000 more than the option purchase price. The check is received by the closing office April 6th.

On April 7^th, the closing office receives an e-mail from the buyer that reads:

You have my permission to release funds to the seller.

Also on April 7^th, the seller e-mails wiring instructions to the closing office, directing $98,000 to be wired to the account of an unrelated third party. The closing office initiates the wire on April 7^th. On April 10^th, the closing office is informed that the cashier’s check is counterfeit, and that the credit union in question had changed its name over two years ago. The closing office attempts to recall the wire, but the account holder had drained the account.

Notice the red flags in this fact pattern:

• No real estate agents or attorneys are involved;
• The transaction is not a purchase of real estate, only an option to purchase;
• The contract is unusual, and the fonts vary within the document;
• The cashier’s check is from a little known credit union in a different state. Often the location will be remote enough to involve a different Federal Reserve;
• The word “authorization” is spelled incorrectly in the contract and in an e-mail;
• The seller instructs the closing office to wire funds to an unrelated third party;
• The contract purchase price is less than the amount shown on the check, and the wiring instructions use the higher amount; and
• E-mail is the only form of communication.

Timing is crucial to the scheme! The fraudsters know that they must withdraw the funds the moment the wire hits.

Take these steps to avoid being a victim:

• Call the bank or credit union to verify the validity of the check;
• Do not disburse against uncollected funds of any type;
• Recognize the unusual initial contact and refuse to become involved in the transaction; and
• Require live signatures and picture identifications to release funds.

Have you seen similar fraud scheme attempts?  If so, please share them with the letstalkdirtsc.com audience so we can all be more vigilant!