MQMR Compliance Hot Topic: Wire Modification Process

COMPLIANCE HOT TOPIC

QUESTION:
With wire fraud on the rise in the mortgage industry why should I have a Wire Modification Process in place and what are some steps I can take to mitigate the risk of wire fraud?
 
ANSWER:
The potential of wire fraud is on the rise. Perpetrators have grown more sophisticated in their ability to disguise and find ways to make an email look legitimate.  In fact, the FBI reported that the amount targeted by perpetrators via business email compromised in 2016 was $5.3 billion.1  Over the past three years, the Minneapolis FBI office has tracked approximately 14,000 victims in the United States with fraud approaching $1 billion.2
There are some steps to take in an effort to mitigate wire fraud by implementing process controls and best practices such as the following:

1. Independently validate the bank account and routing numbers on the wire instructions by phone and embed them into the Loan Origination System (LOS) with restricted access to updates.
2. Leverage the settlement agent’s secure portal or secure email to obtain wire modifications.
3. Ensure you have a strong policy and procedure (and training for employees) in place when there are changes to the wire instructions whereby your funding team follows-up with a phone call to the settlement agent or title company (not using the phone number on the modified instructions) to ensure the changes are accurate. Phone numbers on compromised wire modifications will likely be answered by the perpetrators.
4. Educate borrowers early in the loan process about the dangers of last minute wire instruction changes and the prevalence of phishing scams.

Once confirmed, the LOS should be updated with the validated changes by a member of the management team and the data field should be locked down to prevent any additional changes, which have not been validated.

1. Internet Crime Complaint Center (IC3) | Business E-mail Compromise E-mail Account Compromise The 5 Billion Dollar Scam. May 4, 2017. Accessed February 23, 2018. https://www.ic3.gov/media/2017/170504.aspx#ref1.
2. Van Nest, Jeffrey. "KARE 11 Investigates: Email scam targets homebuyers." KARE. May 02, 2017. Accessed February 23, 2018. http://www.kare11.com/article/news/investigations/kare-11-investigates-email-scam-targets-homebuyers/435752635.
   

For more information on MQMR or other hot button compliance related topics, contact:

• Britt Haven or call 818.940.1200 Ext. 421
  
• Alan Ridenour or call 818.940.1210