Mortgage brokers and real estate lawyers are warning homebuyers of an emerging form of fraud in which criminals impersonate a lawyer through e-mail and convince people to send their down payments to fraudulent accounts.
In one case, mortgage broker Darren Lacy, who is based in Ajax, Ont., said fraudsters managed to hack into a real estate lawyer’s e-mail and used it to convince his client to wire $82,000 of a down payment to a fake account.
Mr. Lacy said his client was saved by a bank teller who found it suspicious that the lawyer asked for a wire transfer instead of a bank draft, and called the lawyer’s office to confirm whether they wanted the down payment.
In another case, Whitby, Ont.-based mortgage broker Denise Laframboise said one of her clients lost $88,000 when she received correspondence from an e-mail that looked very similar to her lawyer’s. Ms. Laframboise said her client only realized the e-mail was fake more than a week later.
Ms. Laframboise said her client’s financial institution said the transfer was made willingly and that there was nothing they could do to reverse the transaction.
Industry professionals say similar cases of fraud are becoming increasingly common as more processes of real estate transactions take place online, and as fraudsters become increasingly tech-savvy. They say the form of fraud involves criminals surveilling e-mail exchanges over a lengthy period of time before they impersonate real estate lawyers as the time comes for a down payment to be transferred.
Mr. Lacy had never previously seen fraudsters try to steal down payments through e-mail interactions before the pandemic. “The idea that this has happened to me twice in the last six months … it is happening more often,” said Mr. Lacy.
Ms. Laframboise said this form of fraud is likely a hiccup as more parts of real estate transactions happen virtually. Brokers and lawyers say that wire transfers and direct deposits are becoming a more common way to send down payments to your real estate lawyer, but said requests for that money will usually be discussed in a phone or video call first.
If you have any bad feelings about a request for money, the best course of action is to pick up the phone and call your lawyer through a number you’ve used before to ensure you’re transferring funds to a legitimate account, they say.
“As we do everything online, this kind of fraud is becoming more likely,” said Ms. Laframboise. “It used to be completely absurd to not meet your lawyer in person before COVID-19. Now we’ve transferred to Zoom, and people are more accepting.”
Toronto-based real estate lawyer John Aruldason said professional insurers and industry associations have been issuing warnings about the form of fraud in recent months.
Mr. Aruldason said one recent case study provided by an insurance company involved the sale of a roughly $30-million commercial property. Hackers were able to get into the e-mail account of the seller’s lawyers and watched a lengthy correspondence between the buyer and seller’s lawyers until they chose an opportune moment to send a fraudulent bank account number for millions of dollars to be transferred into.
Mr. Aruldason said that even though lawyers were involved in both sides of the transactions – and the buyer’s lawyer attempted to confirm the bank deposit details with the seller’s counsel – money was sent to the wrong account before being filtered to dozens of other overseas bank accounts.
Since lawyers were involved in both sides of that transaction, professional insurance companies were able to compensate the buyer.
However, in residential sales when a buyer is sending money themselves, Mr. Aruldason and Ms. Laframboise warned that there is no form of insurance that’ll cover them and buyers have to do their due diligence.
People affected by such forms of fraud have begun to take extra precautions, such as one firm that Mr. Aruldason worked with which details its standard practices for exchanging money at the bottom of every single e-mail.
“There’s a heavy reliance on online communication, but a lot of this fraud can be mitigated by speaking to your professionals,” said Mr. Aruldason.
Mr. Lacy’s client, who was saved by an inquisitive bank teller, has started incorporating a secret word in every single e-mail between them and Mr. Lacy to verify their identity.
The process of purchasing a home can be chaotic and stressful, but Mr. Lacy urged people to pick up the phone and call their real estate agents, mortgage brokers or lawyers any time they’re being asked to do something that feels suspicious, such as sending personal information or large sums of money. He said verbal confirmation can be the easiest way to spot fraud.
Ms. Laframboise said homebuyers should also try to confirm that the e-mail is being sent from a proper e-mail address, not one that is similar to the professional they’re working with. People who are suspicious of any correspondence should call their broker or lawyer through an existing contact in their phone or a number listed on Google, she said, rather than one listed in a suspicious e-mail.
She added that people who realize they’ve sent money to a fraudster should contact their bank as quickly as possible – she has heard of one case where a bank was able to freeze the money transfer because a home buyer realized their mistake immediately.
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