Data Facts Lending Solutions Blog

Why Lenders Need to be Concerned About Wire Transfer Fraud

by Susan McCullah

Feb 14, 2018 9:13:00 AM

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wire-transfer-fraudWire transfer fraud is one of the most serious trends in the mortgage industry. Recent Fannie Mae and FBI fraud alerts on wire transfer fraud identify more than 14,000 instances of this fraud scheme over the last year. Under this fraud scheme “hackers” use social engineering or computer intrusion techniques to send out a change of wire transfer instructions with the “new” account information.

Wire fraud can take two distinct paths. It can either occur between the settlement company and the lender, or the seller and the settlement company.


Hackers penetrate the settlement systems. They then either send new "wire" instructions with the hacker's account information, or they "spoof" the seller and send a new bank account with their information to the settlement company. Without proper verification, the money is sent to the hackers who then off-shore it, out of reach.

This burgeoning trend is set to cost lenders BIG. According to the FBI, a staggering 5.3 billion dollars was targeting in the mortgage industry in 2016! Fraudulent transfers were re-routed to 103 countries.

Why is this so prevalent?

There are 4 key reasons:

1: Plenty of opportunity. Mortgage lending is the source of millions of dollars changing hands on a daily basis. These large sums are tempting to fraudsters.

2: It's international. The culprits may be operating from thousands of miles away, making it difficult to catch and stop them.

3: It's hard to track. There are tons of different schemes the fraudsters employ. By the time the crime is realized, the hackers have disappeared with little or no trail.

4: It's continuously evolving. New technologies arise constantly that the hackers can use. By the time one of their strategies is figured out, they have moved on to a new, slicker scheme.

What can lenders do to protect themselves?

Unfortunately, there isn't a one-size-fits-all plan to put in place to stamp out wire transfer fraud altogether. There are some processes and some mortgage lending services that help lenders minimize the risk of falling victim to costly wire fraud.

  • Validate account ownership. Relying solely on email and text messaging gives the hackers more of a chance of bilking you. A recent Fannie Mae Bulletin recommends using verbal confirmation known by both parties.
  • Work with vendors who put a high priority of wire fraud protection. Ask your current vendors how they guard against wire transfer fraud. Are they investing in systems that supply proper protection? Do they continue to educate themselves and their employees on current trends? Those with outdated processes and few specific plans might need to be replaced.
  • Check the settlement agent status. This ensures compliance with the CFPB and investor requirements to perform due diligence and monitor service providers.
  • Double-check everything. Sometimes catching a one-letter difference in an email address determines falling for a hacking plot or catching and stopping it. Being detail-oriented is key in catching small discrepancies like this.
  • Create a documented trail. An easy-to-audit trail proves lenders performed in good faith. A step-by-step procedure is more likely to catch a suspicious act and nix wire transfer fraud.
  • Using specially-designed reports. New, computer-generated reports are on the market that can help pinpoint high risks of wire fraud, as well as keep lenders in compliance with current regulations.

Understanding wire fraud is one of the costliest trends in the mortgage industry today is the first step toward minimizing its impact. Detecting and addressing wire fraud is everyone's responsibility. By putting set procedures in play, paying attention to detail, and reporting any suspicious or unusual behavior, lenders can protect themselves and their clients from falling victim to this rampant crime.

Want more information? Join our complimentary webinar on Tuesday, February 20th for pointers on how to protect your company from wire transfer fraud. 


Topics: Mortgage compliance, Fraud, compliance tips for lenders, mortgage lending services

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