By Tom Weyant, VP, Risk Management and Data Privacy Officer, Alliant National
When wire fraud occurs, the loss of funds can be deeply distressing. That pain is now often compounded by the legal baseline for “reasonable care” dramatically shifting. Courts no longer view wire fraud or deepfakes as unavoidable cyber events or tragedies.
Title agents now face escalating legal risks and negligence liability. Cybercriminals are increasingly leveraging deepfakes in social engineering and business email compromise (BEC) to orchestrate real estate wire fraud and seller impersonation schemes.
If an agency fails to use basic, reasonable defenses like multi-factor authentication or automated ID and bank verification platforms, judges are increasingly finding them liable for lost funds under negligence and breach claims.
In addition to the security measures used, a court or jury will likely also consider the overall reasonableness of the title company’s wiring procedures. They will review the steps agencies took to safeguard wire transfers and verify their authenticity.
Did the agent double-check the sender’s email address? Did the agent follow proper procedures to detect communication peculiarities, like grammatical errors or whether an unsecured email was used? Did more than one employee review the communication? Did they confirm the wiring instructions in a second, alternative mode of communication? These are just a few questions that a court might ask when assessing liability.
Agencies can reduce their exposure by strictly adhering to procedure. Carefully reviewing and authenticating all communication not only minimizes susceptibility to wire fraud schemes but also the chances that a court or jury will find the agent negligent.
All agents are at risk of ID and wire fraud-related cybercrime. Whether they are direct victims of the fraud or simply involved in a fraudulent transaction, agents face a real possibility of being held liable. Wire fraud schemes also continue to grow more pervasive and sophisticated with each passing year, which makes reasonable and prudent anti-fraud controls critical to prevent financial losses. Some best practices include:
- Requiring two forms of communication/authentication before issuing a wire;
- Using multi-factor authentication;
- Using an anti-fraud tool on every transaction;
- Educating and training employees in data security and maintaining evidence records; and
- Using secure, encrypted email with passwords and digital signatures for messages.
Using these precautions decreases the risk of fraud and makes it easier to defend against civil litigation should your agency unfortunately fall victim to one of these schemes. Title agents should also carry standalone, comprehensive cyber insurance. This adds an essential, additional layer of protection against both fraud-related crimes and their resulting liabilities.
Have questions about strengthening your agency’s wire fraud prevention practices or technology due diligence? Contact Tom Weyant at tweyant@alliantnational.com.
