Managing Broker Corner
Is Your Brokerage a Target for Fraudsters?
Brokerages need to be aware of the risk of online “social engineering” fraud and to take steps to mitigate the risks. The Law Society of BC recently issued a fraud alert to BC law firms, warning of an emerging pattern of social engineering frauds targeting trust accounts. Real estate brokerages that hold funds in trust should also be aware and vigilant against frauds.
What is Social Engineering Fraud?
If a fraudster tricks you into willingly paying funds out of trust through the intentional misrepresentation of some material fact, you’ve fallen victim to a “social engineering” fraud. They often involve fraudsters pretending to be an existing client or someone authorized to give instructions on the client’s behalf.
How does it work?
Fraudsters may hack into the email account of a party to a real estate transaction, acquiring enough information to allow them to assume that individual’s identity. Once deposit funds have been placed in the brokerage trust account, the fraudster emails the brokerage with directions to redirect the funds to a different account. There are many variations on this theme, and all may result in missing funds.
How can you protect your brokerage from fraud?
Establishing brokerage protocols and educating staff and licensees to follow those protocols is one of the most effective means of ensuring you do not fall prey to fraudsters. Putting effective security measures in place to protect electronic records and detect security breaches is another important step. For more information on protecting your business, and consumer funds entrusted to you, from risk of fraud, see the Competition Bureau Canada.
Planning a Vacation? Scams can happen during holidays! Remember to arrange to delegate your responsibilities to a competent licensee at your brokerage (a managing broker or associate broker is recommended) while you are away. For more information about delegation, see the Brokerage Standards Manual.
If you suspect that your brokerage or clients have been targeted for fraud, contact a Professional Standards Advisor at RECBC: [email protected].