Over the past several years, buyers, sellers and closing agents have made greater use of wire transfers to deliver and collect funds. While this is a best practice for risk management in real estate transactions, it has fallen prey to scammers who exploit security weaknesses to steal money. Based on our experience at Keyes and what we have learned from real estate experts, the threat can be minimized.

Wire transfers are often used for earnest money deposits at the time a contract is executed and for final cash payment on the day of closing. They offer many advantages. First, they are fast; money arrives on the same day it is due, often in a matter of hours. There's no waiting for a check to clear, even if it's a certified check. Second, wire transfers comply with requirements for cleared funds so that disbursements can be made and a home sale can be finalized.

It's a great system, but it's not perfect. Like every banking transaction, it's susceptible to theft and fraud. The threat is quickly growing. The FBI said in a May 2017 report that fraudsters tried to steal $5.3 billion of wire transfers between October 2013 and the end of 2016. That was up from $3.1 billion between the same October and May 2016. One analyst told Reuters that the figures were only one-fifth of the likely total.

Losses are real and growing exponentially. The FBI told The Washington Post that nearly $1 billion in funds for real estate transactions were diverted between July 2016 and July 2017. The year before, the figure was only $16 million.

Wire transfer fraud operators use electronic communications such as telephone and email to obtain money. One of the most common designs involves criminals hacking into a real estate agent or title company's email account. They follow the transactions as they approach the final closing date. Often, they target sales of high-end homes.

Consumers and real estate professionals need to protect themselves from these criminals, who are becoming increasingly clever in manipulating what is largely a safe system. The fraudsters assume the identity of the title agency closer or representative who is handling the sale. They forge that person's email signature, file number and other details that appear specific and authentic. Next, posing as a Realtor or title agent, the scammers send an email to the buyer, providing wire instructions to the criminal's bank account, not that of the title agency's legitimate account.

“It's unbelievable how often this is happening,” said Jessica Edgerton, associate counsel for the National Association of Realtors in Chicago, told the Post.

Can anything be done about after the fact? Maybe, if the fraud is caught fast enough. The FBI can use what's called the “Financial Fraud Kill Chain” to stop a fraudulent transfer under limited conditions that include the fraud being discovered within 72 hours and the funds being sent internationally.

The best protection is the same individuals and businesses use to avoid having their identity stolen. At Keyes, we recommend that the seller advise the title agent that they possess a voided check that will be delivered at closing that contains their printed name matching the title to the property, and bank account routing information.

Alternatively, the seller can go to their bank and ask the banking officer to print wire instructions with their name and specific bank account information. Sellers can also opt for their sale proceeds to be issued in the form of an escrow check.

Buyers should take similar precautions. First, verify any email that requests information or payment related to the closing. That means calling the title agency closer at a phone number that the person provided, not the one in the email. That number may be fake and the person answering the phone may be the fraudster trying to steal the buyer's money.

A buyer should also contact the closer, the mortgage company and the sales agent if sent any change in wiring instructions. Once thieves find out who is involved in a sale, they will try to reroute a buyer's funds to their account. A trained sales agent can help spot a fraud attempt and alert everyone involved, including the seller and his or her agent.

The best brokers stay on top of the latest fraud schemes through continuous education of their real estate agents, by implementing best practices, and by issuing informational notices on every transaction.

We recently thwarted one fraud attempt. A lender asked our closer why she had sent the final cash-to-close dollar figure to the buyer when the lender had not yet approved the amount. Our closer responded that she had not done that.

That alerted us to review our emails. We discovered that the fraudster had replicated our closer's email signature and file references to divert the funds. Working together, we stopped the theft before it occurred.

Communication, diligence, implementation of best practices and notifications are a seller and buyer's best defense. By closely watching each step, they can enjoy the transaction experience. Here are precautions First American Title Insurance Company recommends to protect yourself from wire transfer fraud:

• Do not share your online banking logon credentials (user ID and password) with anyone.
• Do not share your account number with anyone who does not need it.
• Never access your bank account using a public computer, such as at a library or place with public WiFi.
• Monitor your accounts regularly for unauthorized transactions. Immediately report any unauthorized transactions to your bank.
• Be suspicious of emails from free, public email account domains as they are often a source of risk.
• Watch out for phishing emails with embedded links, even when they appear to come from a trusted source.
• Install a firewall on your computer to prevent unauthorized access.

Rose M. Sheehan is legal counsel at Home Partners Title Services in Weston and Mike Pappas is president of Keyes Co.