Estimated reading time: 3 minutes
Realtors, Title Companies, Lenders
Who is responsible for wire fraud? This is a warning to realtors, title company and lenders. You could be on the hook for wire fraud. A white paper released by identity management company CertifID, analyzed a recent court ruling that increased the standard of care owed by transaction participants to prevent wire fraud losses.
The Court Case: Bain v. Platinum Realty LLC et al.
Thomas Cronkright, II, CertifID founder and CEO, wrote a white paper called “Wire Fraud Is Everyone’s Problem“. Here, he explained the ruling in Bain v. Platinum Realty LLC et al. and what this means. Consequently, anyone involved in a real estate transaction is liable for fraud if it occurs, no matter the relationship between the parties.
The Verdict and Who is Responsible
The jury awarded 85 percent of losses incurred by a buyer, and the real estate agent and her broker were liable for the losses. The buyer wired funds into a fraudulent account in connection with the transaction. Cyber fraudsters compromised the real estate agent’s email account. They accessed the account and sent fraudulent wiring instructions to the buyer. The buyer trusted the wiring instructions because they were sent directly from the agent’s email account, and the email contained information relevant to the upcoming real estate closing. The jury found the agent and her broker liable for negligent misrepresentation, and both of them had to pay $167,129.27. Importantly, there was no direct tie between the buyer and the agent or the broker, as the agent and broker in this case, represented the seller. Additionally, the buyer was an experienced real estate investor that was unrepresented.
The Moral of the Story and Who is Responsible
“The moral of the story appears to be that, no matter your role in the real estate transaction, you have a duty to take reasonable steps against cyber fraud,” Cronkright said. “Title companies, loan officers, attorneys or financial institutions … this ruling sends a strong signal that we’re all responsible to guard against cybercrime and wire fraud.”
Conclusion: Two Points
Cronkright said the case appears to expand the duty of care in two ways. First, participants may be held liable for losses due to cybercrime if their email, systems or information is compromised. Secondly, the standard of care may expand to all parties in a transaction regardless of direct contract or fiduciary relationships between them.