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Hackers target US real estate deals, with devastating impact

Washington

JAMES and Candace Butcher were ready to finalise the purchase of their dream retirement home, and at closing time wired US$272,000 from their bank following instructions they received by e-mail.

Within hours, the money had vanished. The e-mail account for the real estate settlement company had been hacked, and fraudsters had altered the wiring instruction to make off with the hefty sum representing a big chunk of the Butchers' life savings, according to a lawsuit filed in state court.

A report by the FBI's Internet Crime Complaint Center said the number of victims of e-mail fraud involving real estate transactions rose 1,110 per cent between 2015 and 2017 and losses rose nearly 2,200 per cent. Nearly 10,000 people reported being victims of this kind of fraud in 2017 with losses over US$56 million, the FBI report said.

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The Butchers eventually reached a confidential settlement in a lawsuit against their real estate agent, bank and settlement company, according to their lawyer Ian Hicks.

The problem is growing as hackers take advantage of lax security in the chain of businesses involved in real estate and a potential for a large payoff. "In these cases, the fraudster knows all of the particulars of the transaction, things that are completely confidential, things they should not know," said Mr Hicks, who is involved in more than a dozen similar cases across the US.

Real estate is just one segment of what the FBI calls "business e-mail compromise" fraud which has resulted in some US$12 billion in losses over the past five years. But for home buyers, the fraud can be particularly catastrophic.

Real estate transactions have become a lucrative target for hackers "because they handle a lot of money and because they have employees who are not the most technically savvy", said Sherrod DeGrippo, director of threat research for the security firm Proofpoint.

Hackers often do their homework and "sometimes they know more about the business than the employees do", she said. Consumers may also be less cautious when they are feeling positive about a new home, making it easy to fall prey to scammers, Ms DeGrippo said.

She said the schemes appear to originate from overseas, possibly from Russia or Africa, using a variety of techniques to stay ahead of law enforcement. "They employ a lot of money 'mules'," she said. "They move the cash from bank to bank to bank."

Banks have been working to counter what is seen as a growing fraud problem but are often unable to prevent scams stemming from hacked e-mails, said Paul Benda, senior vice-president for risk and cybersecurity at the American Bankers Association.

"Banks have very strong controls in place," he said. "But when they are given wiring instructions from a customer they have a responsibility to send it where it was instructed." Mr Benda said that customers need to know a wire transfer is "just like cash" and may be impossible to recover, especially if it ends up overseas.

Lawsuits from consumers often target real estate agents, lawyers, escrow agents, banks and settlement companies that prepare documents for deals.

"There are a lot of people involved, and (fraudsters) can hack into any one of these parties," said Finley Maxson, senior counsel at the National Association of Realtors. He said the Realtors and other associations are moving aggressively to educate all parties involved about the potential for fraud and the need for better security.

It may be difficult to establish liability, but Mr Hicks said that "consumers are not going to be careless with their life savings" and that the real estate professionals have a responsibility to ensure the security of their systems, and to give customers adequate information. AFP