A lot has been written about the fact that wire transfer fraud has quickly become the real estate industry’s greatest cyber risk. These fraudulent schemes to divert funds continue, and losses to the parties involved are often devastating.
As a result of increased cybercrime, buyers, sellers and real estate professionals must remain vigilant and verify any closing or wiring instructions sent via email, by using a trusted phone number, or via a face-to-face conversation — especially if they involve last-minute changes to previous instructions.
In an effort to prevent wire transfer fraud, all parties involved in a real estate transaction should implement a series of security measures and be alert to red flags that may signal a scheme to defraud. One such red flag to be aware of (and alert clients to) is the use of a SWIFT Code in a wire transaction, which evidences the fact that the money being wired will be sent to a financial institution outside of the United States.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) Code is an identification code that is often required for the completion of international wire transfers. Each SWIFT Code consists of a unique combination of letters and numbers, which is used to identify a financial institution’s branch among the members of the SWIFT network.
SWIFT Codes consist of eight or 11 characters. When an eight-digit code is given, it refers to the bank’s primary office. The first four characters of a SWIFT Bank Identifier Code (BIC) represent the financial institution. For example, Chase Bank’s SWIFT Code begins with CHAS, while the Wells Fargo Bank code begins with WFBI.
If someone outside of the United States was wiring money to a Bank of America inside the U.S., the SWIFT Code for the incoming wire will be BOFAUS3N. The first four characters, “BOFA”, clearly represent the name of the financial institution (Bank of America).
The fifth and sixth characters of a SWIFT Code denote the country in which the bank is located. For example, the SWIFT Code for the main office of the Bank of China is BKCHCNBJ; “CN” denotes the location to where the funds will be wired (China).
While wire transfers to international accounts as part of a real estate closing may be legitimate, they should always be questioned and viewed with skepticism.
When wiring instructions include a SWIFT Code, they should be verified with a known, safe telephone number or personal conversation. Incoming telephone calls are insufficient due to the known risk of “call spoofing.”
According to the FBI, in fiscal year 2017, nearly $1 billion ($969 million) was “diverted or attempted to be diverted” from real estate purchase transactions, and wired to “criminally controlled” accounts.
Real estate professionals must therefore remain vigilant and aware of red flags, including the use of SWIFT Codes in wire transfer instructions.
Cybersecurity and Wire Fraud Policies and Procedures (downloadable Word doc)
Wire Fraud Advisory (downloadable Word doc, available in zipForm® Feb. 2018)