Editor-in-Chief Sarah Wheeler certificate id and CEO sun titlewe talk about the latest in fraud and fraud-fighting, as bad actors leverage new technology tools to wreak havoc on real estate buyers and sellers.
Sarah Wheeler: Can you briefly explain where we stand regarding fraud?
Thomas Cronkright: Fraud continues to be one of the biggest challenges in the real estate industry, along with macroeconomic challenges such as interest rates and inventory shortages, and current litigation over fees. This year, wire fraud through social engineering and business email compromise has gotten even stronger, and it’s being done in several new ways.
Therefore, scammers are still focused on cash payments to buyers. While they have focused on mortgage repayments, they are becoming more sophisticated about repurposing mortgage repayments. And the seller’s net profit remains the goal.
One of the advances this year has been the adoption of new technology platforms like chatGPT, which uses AI to mimic someone’s voice and spoof their phone number. As a result, bad actors are increasingly leveraging technology, which makes their social engineering strategies more reliable.
SW: How are they using generative AI?
TC: There are examples of generative AI being used to spoof someone’s voice to compose an email that might have otherwise been easier to detect. We found that because the number of homes sold is down but home prices are up, bad actors are becoming more patient and disciplined, which makes their scams more believable.
So let’s pull this string deeper. This is forcing those of us in the title settlement, real estate, mortgage lending, and legal industries to reconsider whether we can even trust voicemail. So it looks like a client left a voicemail. “Hello, I’m traveling.” I know I said I could attend the closing ceremony and pick up the cashier’s check. But now you’ll need to send your wire payment information, so make a note of this on file. ” This would set the industry back, as even some of the underlying, mostly immutable security layers of the process could be compromised, or at least called into question.
There are programs that take 10 seconds of your voice and put it into a program that can play it back and say whatever you want it to say, and it takes less than three minutes. And those are all currently publicly available technologies.
Sarah Wheeler: What else are you watching?
TC: Fraud impersonating a seller. What we’ve learned about scammers is that they never quit a successful scam. That didn’t solve anything, but new risk vectors have emerged significantly this year. It was a scam impersonating the seller. This typically focuses on vacant or unimproved properties where the scammer doesn’t have to email his account or even do any fishing. There is no need to take over accounts or change rules. They simply register on the title deed and look for properties listed as vacant or unimproved. And they impersonate property owners.
They create fake government-issued documents, such as driver’s licenses and passports, that list all of the property owner’s credentials except for the villain’s photo. They then ask a broker to list the property. The real estate agent receives the property, asks for identification, and it is checked out. And it continues all the way until closing. The “seller” requests a remote closing, so an out-of-state notary and a bad actor show up with fake identification and sign the documents in front of the notary.
These documents go back to the title company and the funds are sent to the bad actor’s account. Then, months or even years later, property owners find out. There is an incident that is currently attracting attention on the East Coast. Someone bought the land and started building a nearly $1.5 million home. A year later, the property owner showed up and filed a lawsuit saying he was going to demolish the house and I never sold this.
SW: How widespread is this?
TW: I’m in West Michigan, and in our market alone, CertifID and title agents have identified 35 cases of seller impersonation since March. And today I learned two more things. So, with generative AI, aside from voicemail and wondering who you’re even talking to, you now have to seriously think about physical documentation if someone else is initiating the conversation. . Are you trying to make sure this is a valid ID, or that the person’s identity is who they say they are so you can be sure that you are actually dealing with the right person no matter what? Do we really need to check? They are placed in front of me.
SW: What you’re talking about is a nightmare, and in fact, it was your own nightmare that led you to find CertifID. And one of the worst parts is that there’s not much you can do after that.
TW: Yes, unfortunately the pendulum has swung towards prevention. Because it’s difficult to do the therapeutic side after the incident. Now that technology has advanced, this crime almost crosses borders and is rampant 24 hours a day. It starts with education, and the question for all of us is: do consumers understand that their lives can be saved? Could their liquidity be at risk? Furthermore, someone could be impersonated and the parties involved may not know it.
We then move from education to engagement and how to keep engagement active during this long trading cycle. Make sure that the same level of awareness is still your top priority on days 42 and 43. You also need to educate buyers and sellers about where your money is going. And frankly, as an industry, we don’t talk about how money moves enough.
SW: Let’s talk about the identity verification part.
TC: At CertifID, we take a multi-layered approach to how we attest and how we establish a level of trust in someone’s identity. My title company uses CertifID to verify the identity of all sellers at the point of initiating a title order. Before we search public records, we say: “Why don’t you just take a moment and make sure they’re who they say they are?” And we catch these bad guys every day. Two years ago, I would have said once a month or once every other month, but now it seems like it’s a daily occurrence.
SW: You’re an executive at a company that many other companies trust to keep you safe. Why does thinking about what is happening and what could happen keep me up at night?
TC: All of them are true! This is wire fraud, but I think more important than that, it’s social engineering. Because we now see wire transfers as monetizing social engineering. Therefore, our mission is and will continue to be to validate identity. And no team or leadership structure is more obsessed with this particular issue than my team.
We are very focused on how new advances in technology are allowing attackers to step up their game. Next, you need to make sure the technology is working, including how you speak to threats and where it sits in your workflow. — We must adapt and continue to adapt to these new threats.
The other thing that keeps me up at night is that there’s still a huge optimism bias that drives action on a lot of things in this industry. People think it’s not my risk. I’ve heard about it, but it never happens to me. I live in rural northern Michigan, and no one would pick a $40,000 piece of land. I’m telling you, they absolutely will.
Scams are constantly evolving. Major data breaches have also occurred, giving criminals more information about bank accounts and social security numbers. New vulnerabilities exist in the industry.
SW: How can you ensure your team is evolving faster than new fraud threats?
TC: I think it’s done through culture and it’s done through transparency. And that means you need to be attached to it. We were very successful in raising our Series B, and the idea was that it would come from our product and security leads. In addition to protecting wiring information, we plan to come up with a simple identity verification tool. This was one of the things we piloted across the country and it worked beautifully. So this is an example of an ID verification only tool that allows someone to verify their identity at the beginning of the relationship, rather than when transferring money.
The win in this situation is for someone to raise their hand and say, “I think something’s wrong, so maybe you should check with someone before you send this wire transfer.”
We made strategic decisions from a talent perspective to seek out the best talent, and we pursued that unapologetically. And then you bring that group together around a mission like the one we’re working on right now, and you infuse it with culture, you infuse it with evidence. We are called to do this and we are just grateful. We have a team around us that has this vision and passion and is able to execute it every day.
There’s not a shred of daylight in what’s going on in the market. I was determined that this would be an ongoing challenge for many years to come.
One reason for this is that more purchase transactions are now done entirely in cash. Real estate transactions are a big pot for scammers because the transactions in a cycle are small and the amounts are high. The other thing is the movement of money. Previously, once you were notified, even if it was only the third or fourth day after the transaction was completed, there was a fair chance that the funds would remain in the account where they were misappropriated. . Now it has been reduced to one or two days. Money moves very quickly between crypto wallets and tumblers, then to other wallets, and finally to fiat currencies or overseas banks.
SW: Why are you optimistic as the fraud battle rages on?
TC: I’m very optimistic. Because we’ve shown with our platform and with our customers that if our employees and customers are trained, if we get real adoption, we can eliminate this problem at scale. My pocket was picked up for $180,000 in 2015, and nothing like that has happened on our watch since. We are one of Michigan’s largest title agencies. So it’s possible, and we’ve seen examples of companies, large and small, that will do what they need to do if they put in the effort. The question is how do we approach and train people who are unaware of the risks and who think, “I don’t deal with money, I’m just a real estate agent, this is someone else’s problem.” is. Until a client loses their life savings or gets sued for listing and selling a property without knowing they were completely duped by someone pretending to be the actual owner.
We have a roadmap here, so I’m incredibly optimistic. CertifID is not just a silver bullet. These are important layers: education, engagement, technology, and acquiring and building community. It’s safer because you can be more proactive.