Security must keep pace with technology. We experience it first-hand. Remove your shoes, jacket, liquids and electronics. Place them on the conveyor belt, and proceed to the body scanner. But wait, this seems odd – I’m heading into my real estate closing, not the airport, right? 

Fortunately, real estate transactions do not command the physically invasive security measures that accompany aviation, but the gap may be narrowing slightly based upon recent alerts. National and local title insurance underwriters and The Florida Bar have recently published alerts in reaction to the latest fraud scam affecting real estate transactions – the weapon of choice is the Smartphone.

How It Works

A party to the transaction (in this case, a fraudster) is issued a check for closing proceeds, then subsequently requests that the closing agent send the proceeds via wire transfer in lieu of thecheck. This request can be made during or after the closing. The closing agent takes the check back, voids it (rather than stopping payment on it) and wires the proceeds to the fraudster’s account as requested. In the meantime, and unbeknownst to the closing agent, the fraudster has already deposited the check using a Smartphone. The amount is deducted twice from the closing agent’s account, and paid twice to the fraudster. New apps allow a check to be deposited by using the Smartphone’s camera to take a picture of the front and back of the check and deposit it into the payee’s account. The check remains void of any physical markings that would indicate that it has been deposited. This creates an obvious danger for the unsuspecting closing agent.

Impact & Prevention

This scam can impact any business deal, not just real estate transactions. All individuals and businesses should protect their issued checks as if they were cash, and should deny a payee’s request to exchange the check for another form of payment until verification can be made that the check has not been deposited. It takes less than a minute to snap images of the check and deposit it via Smartphone, so leaving the room for a few minutes or simply turning your head can leave you exposed. 

Perhaps there is truth to one of Albert Einstein’s famous quotes: “Technological progress is like an axe in the hands of a pathological criminal.” The good news, however, is that you are now armed with the information necessary to protect you from this scam. You should also be pleased to hear that we have no current plans to install metal detectors and body scanners outside of our conference rooms, and we will continue to monitor misuses of technology that could affect our clients and friends.