In March 2024, a local company made an electronic payment of over $700,000 to a Twin Cities construction company to cover construction expenses for their new St. Paul office and warehouse.
But the money never made it to the construction company. Someone had gained access to the construction company’s email address and redirected the funds. They appear to have impersonated the project manager of the company with highly convincing emails using the real project manager’s logo and signature block.
As a result, the construction company found itself in legal hot water for negligence, fraud, and breach of contract.
This type of fraud has, unfortunately, become all too common among real estate, construction, and property management companies, where large transactions make them prime targets. The impact on a business can be devastating, including significant financial loss, project delays, and long-term reputational damage.
This is why it’s so important to understand how business fraud and cybercrime happen and to be vigilant in protecting your business and yourself from such crimes.
In a payment redirection scam, scammers obtain sensitive information from unsuspecting employees, often through malware or phishing attacks. They then impersonate the employees to redirect payments to fraudulent bank accounts, just as in the example above.
You can understand how easy it would be to fall for this scheme. When a scammer impersonates a trusted contact (such as a vendor, supplier, or executive) via email, very few of us would question the validity of that email…especially when it includes convincing details like official company logos and signature lines.
To guard against this type of scam, make sure to always verify payment instructions through a trusted, secondary channel. For example, call your contact at the company to confirm payment instructions and financial details verbally, rather than through email.
It’s estimated that 1 in 20 consumers have been victims of wire fraud. And unfortunately, real estate transactions are a prime target for this type of fraud. In fact, it’s so common in real estate transactions that many brokers now require a signed disclosure acknowledging the risk of wire fraud.
Similar to payment redirection scams, wire fraud happens when bad actors hack the email accounts and assume the identity of title company staff, real estate agents, or closing attorneys. They then send false wire instructions to divert deposits, closing costs, or even mortgage payoff funds from the intended recipient to their own bank accounts.
To avoid becoming a victim of wire fraud:
APPRO Development & CERRON Commercial Properties recommend the use of licensed title companies for distribution of funds and proper documentation of payments
With this type of fraud, a scammer gains access to a person’s email or other accounts, typically by using malware or spyware installed through a phishing email or other method that leaves the victim completely unaware.
Once they have access, the thief can then monitor the victim’s email correspondence to gather the information they need (including social security numbers, contact information, and bank account information) to pose as the victim to lease a property, apply for a mortgage, or engage in other property transactions.
To protect yourself against this form of fraud, make sure to implement thorough background checks and verification processes when leasing, purchasing, or selling a property.
In this scam, employees are tricked into divulging sensitive information via fraudulent emails or phone calls. For example, scammers might impersonate company executives or vendors to send emails telling finance personnel to redirect ACH or wire transfers to fraudulent accounts.
To protect your business from phishing scams, train your staff to spot phishing attempts and report any suspicious activity. In addition, keep software up to date on company computers, require staff to use strong passwords, and consider implementing additional verification procedures,
When it comes to all forms of business fraud and cybercrime, the moral of the story is: Make sure you know where you’re sending your money!
At APPRO Development and CERRON Commercial Properties, we consider it part of our job to help our clients mitigate their risk of falling victim to these kinds of business fraud and cybercrime. Here’s how we do it:
When you work with the teams at APPRO and CERRON, you can rest assured that we make the safety of your sensitive information our top priority in every transaction. Contact us to get started on your next property purchase, sale, lease, or build.
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