Could you be Sued Because Your Client was a Victim of Wire Fraud?

by | Jan 5, 2018 | Legal Tips

Over the past few months we have discussed how your client could easily become a victim of wire fraud.  We know that real estate agents are prime targets of hackers. These hackers break into real estate agent email accounts and monitor activity. Once they see a real estate closing is scheduled, they create a dummy email that resembles that of the real estate agent. The hacker then sends fake wiring instructions to the client, who in turn wires the closing funds to a fraudulent account. Within minutes their life savings are gone.

Last week we saw the first lawsuit involving this situation where a Rock Hill real estate agent’s email account was hacked. The agent’s client then received fake wire instructions for the law firm which appeared to come from the real estate agent. The client called the law firm to confirm the amount. In the lawsuit it is alleged that the conversation between the buyer and closer at the law firm should have alerted the law firm that the wire instructions did not come from them. Nevertheless, the client wired nearly $45,000 to the hacker and the money was gone.

The client hired a lawyer, who filed suit against the closing attorney alleging that the attorney had a fiduciary duty to counsel the client on the “methods by which the secure delivery of such funds could be compromised” and “the risks and insecurity of email communications.” Lastly, the suit alleges the closing attorney failed to warn their client that no communication had been sent by the law firm.

While this lawsuit involved the closing attorney, the victim could have just as easily made similar allegations against the real estate agent. It is without a doubt that the court recognizes that real estate agents have certain fiduciary duties to their clients. It is not a stretch to hold that those duties could include advising the client about the secure method of delivering funds to the closing attorney, as well as warning the client of the potential for fake emails and wire instructions. Lastly, an agent could face scrutiny over their failure to use a secure email service. In light of the numerous hacks to Google and Gmail, a court might not consider that the safest email account for a real estate agent, particularly when their brokerage offers a secure account.

An agent would be wise to consider using secure email services offered by the brokerage. Additionally, the agent should have candid discussions with their client about the dangers of wire fraud and hacked emails. The agent should notify the client that she will never send the client wiring instructions from the closing attorney. Lastly, the agent should advise the client to call the closing attorney to verify the wire instructions before sending any money.  While having another document signed by the client may seem anathema, having a written policy that the client signs could protect you from a serious and expensive lawsuit.

With it being a new year, it’s a great time to get your affairs for the future in order. While it’s not a particularly cheerful subject for this time of year, it’s important for your family’s sake for you to have your estate planning matters in place and Blair Cato would be happy to help. Blair Cato can assist you and your clients with the preparation of wills, trusts, powers of attorney, and health care directives. If you or any of your clients are interested, please contact Brandon Gregg in our Columbia office at (803) 265-0822 or Chris Brown in our Mauldin office at (864) 999-2031.

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