How financial institutions can help prevent real estate wire fraud
Financial institutions have both a responsibility and an opportunity to help protect clients by implementing strong fraud prevention practices.
- Educate clients on what to expect
Financial institutions are in a unique position to proactively reduce wire fraud risk by equipping clients with clear expectations and practical safeguards early in the transaction process. Many homebuyers, particularly first-time buyers, are unfamiliar with how wire transfers work and may not understand just how vulnerable these transactions can be. Educating clients before the closing phase begins is one of the most effective ways to prevent fraud.
At the start of any real estate financing process, institutions should set the tone by providing clients with written guidance, ideally in both digital and printed formats, on how wire instructions will be communicated and verified. Clients should be told in plain terms:
- How wire instructions will be delivered: Reinforce that legitimate wire instructions will only be shared through secure, pre-established channels such as an encrypted portal or direct, in-person communication. If instructions arrive via email without prior notice or explanation, they should be treated as suspicious until confirmed.
- The importance of verification: Emphasize the need for verbal verification of wiring details by calling a known, previously validated phone number, not any number included in an email or document. Encourage clients to build a “safe contacts” list that includes their loan officer, title agent, and real estate agent’s direct lines.
- Warning signs to watch for: Help clients recognize red flags, including urgent requests to “act immediately,” changes to wire instructions shortly before closing, or emails with subtle misspellings in sender addresses or domain names. Clients should also be cautious of unexpected attachments or links claiming to confirm wire details.
Financial institutions can go a step further by offering fraud-prevention checklists or optional workshops for buyers. Some lenders even include a "Wire Fraud Acknowledgment Form" that borrowers sign to confirm they understand the risks and procedures. These added layers of education not only protect the client but also help establish the institution as a trusted advisor invested in the borrower’s financial well-being.
By demystifying the wire process and arming clients with actionable knowledge, financial institutions create a first line of defense against one of the fastest-growing fraud threats in the real estate market.
- Enable transaction monitoring and red flags
Financial institutions can strengthen their fraud prevention efforts by configuring systems to detect suspicious behavior in real time. Modern fraud detection tools, such as Abrigo Fraud Detection, allow institutions to go beyond static rules by layering real-time behavioral logic with threshold-based alerts. This approach helps compliance teams detect anomalies that often precede wire fraud attempts, particularly those involving real estate transactions.
Abrigo’s advisory team recommends tailoring alerts to focus on high-dollar outbound wire transfers, especially those sent to first-time recipients, recently added payees, or international accounts. These types of transfers are commonly targeted in real estate fraud due to their urgency and high value.
Institutions should actively monitor for the following key red flags:
- Wire transfer amounts just below internal reporting thresholds: Fraudsters often structure transfers to avoid triggering automated review or regulatory thresholds, such as amounts just under $10,000 or an institution’s internal limit for manual review.
- Last-minute changes to beneficiary details: Updates to account numbers, beneficiary names, or destination banks shortly before disbursement should prompt immediate verification. These changes are a hallmark of real estate wire fraud.
- Multiple outbound wires to the same account from different customers: This could indicate a mule account receiving fraudulent transfers. If detected, institutions should immediately investigate and consider freezing the recipient account.
- Newly added payees followed by rapid high-value transfers: If a customer adds a new wire recipient and initiates a large transfer within a short window, the transaction should be scrutinized, especially if this deviates from the customer’s typical behavior.
- Customer activity outside of normal banking patterns: Behavioral analytics can help detect unusual login times, access from new IP addresses or devices, and transactions that do not align with the customer’s historical activity.
- Customers rushing or expressing urgency without context: Staff should be trained to recognize when clients express uncharacteristic urgency or insist on bypassing verification protocols. These behaviors can signal external pressure from fraudsters.
Financial institutions should develop a comprehensive monitoring framework that adapts to new fraud patterns over time. This proactive approach not only reduces the risk of real estate wire fraud losses but also demonstrates the institution’s commitment to safeguarding its clients' most important financial transactions.
- Implement secure communication channels
Encourage the use of encrypted portals or multi-factor authentication to share sensitive transaction details. Many real estate firms and title companies now utilize secure platforms for this purpose. Institutions can lead by example and educate their clients to do the same.
- Cross-train staff and update procedures
Banks and credit unions should ensure that frontline staff and wire room personnel receive ongoing training on fraud trends. Empower them to escalate suspicious transactions without penalty or fear of delaying a deal. Ongoing education can reinforce processes for holding or recalling funds when fraud is suspected.
- Partner with law enforcement and fraud networks
Financial institutions should maintain a relationship with their regional FBI office or other law enforcement partners. Institutions that act quickly, usually within 72 hours, can sometimes recover or block funds from being fully transferred.
Staying ahead of evolving fraud
Real estate wire fraud continues to evolve, but financial institutions can mitigate risk with a proactive, layered strategy. Combining education, technology, and partnerships gives institutions the best chance to detect and stop fraud before clients suffer losses.
By taking these steps, financial institutions not only protect their customers' financial futures but also reinforce their reputation as trusted advisors. When it comes to real estate wire fraud, staying vigilant is not just smart; it is essential to delivering safe and successful transactions.
