Fraud prevention strategies for real estate attorneys in a high-risk environment - by Stephanie Melowsky
Real estate attorneys are one of the most attractive targets for scammers and fraudsters. Managing escrow accounts, coordinating closings, facilitating wire transfers, and handling significant sums of money under time-sensitive deadlines make them incredibly susceptible to bank fraud.
As cybercrime tactics get more sophisticated, attorneys and law firms must evolve just as quickly to protect themselves. From business email compromise to check washing and AI-generated impersonation scams, the risks are real, but so are the strategies they can adopt to reduce potential exposure.
Why Real Estate Attorneys Are Prime Targets
Real estate closings often involve large amounts of money changing hands quickly, multiple parties, and urgency, which are prime conditions for fraudsters. When teams are moving fast and attention is divided, there are many opportunities for scammers to strike.
They are also especially vulnerable because they are often the intermediaries, handling funds on behalf of buyers, sellers, and lenders. Criminals understand that if they can intercept even one transaction through the attorney, the payoff can be substantial.
The Most Common Threats Facing Law Firms
Business Email Compromise (BEC)
One of the most dangerous forms of fraud involves criminals gaining access to an email account (or spoofing one convincingly enough) to insert themselves into an active transaction.
They can monitor communications leading up to closing, then send fraudulent wire instructions that appear legitimate. Often, only a minor change in the sender’s email address sets a fake request apart from a real one. The message typically carries urgency, pushing the recipients to act quickly before verifying details.
Check Washing
Check fraud remains the most common type of attack. Stolen checks can be altered to change the payee or amount, then be deposited into accounts created solely for fraudulent purposes before disappearing. The more checks moving through the mail or physical transport, the greater the opportunity is for this type of scam.
AI Voice Impersonation
The use of AI-generated voices has added a new layer to fraud. In one attempted incident a client experienced, a fraudster used synthetic voice technology to impersonate the client and request a wire transfer over the phone. Fortunately, a vigilant bank manager disconnected the call and contacted the actual client directly, preventing a potential loss.
Red Flags You Should Never Ignore
Fraud attempts often share similar warning signs. Attorneys should always be cautious when clients or others involved in deals display:
• Unusual urgency or pressure to move funds immediately
• Reluctance to verify identity or meet directly
• Last-minute changes to wire instructions (especially via email)
• Slightly altered email domains
• Third-party payment requests
• Foreign accounts without a clear explanation
• Multiple unrelated funding sources
• Missing or inconsistent loan documentation
• Mismatched names on payoff letters
• Sudden requests for overseas wire transfers
Best Practices to Reduce Risk
Real estate transactions require a high level of due diligence to proactively prevent fraud. These steps should include:
• Verifying identity, ownership, and authority
• Reviewing financial statements and the source of funds
• Conducting lien, litigation, and UCC searches
• Confirming escrow and trust compliance procedures
• Reviewing contracts and closing conditions
• Documenting findings and client advisories thoroughly
Equally important are internal controls, like requiring separate user credentials for all employees, restricting access based on responsibilities, and ensuring accounts are reconciled daily by multiple parties.
Why the Banking Relationship Matters
Relationships remain one of the best defenses against fraud. Working with a specialized banking partner that understands legal escrow operations can provide an extra layer of protection. Dedicated bankers who know and understand your business, your transaction patterns, and your authorized contacts are more likely to catch suspicious activity before funds leave the account.
At Orange Bank & Trust, we offer fraud prevention tools such as Positive Pay, which helps detect suspicious check activity and allows you to review and approve/reject flagged transactions, and ACH blockers, which provide alerts and customizable controls for ACH debits and credits. We also offer transaction limits and accounting software integrations to help reduce risk and improve operational efficiency.
When It Comes to Fraud, Speed Is Everything
When fraud is suspected, immediate action is critical. The sooner a bank is notified, the greater the likelihood that funds can be frozen or recovered. Even when fraud is discovered later, detailed documentation and prompt communication will improve the chances of a better outcome.
Protecting Yourself Against the Next Threat
Fraud tactics will continue to evolve and become more sophisticated, but so can the safeguards that can be put in place to stop them. Protecting client funds now requires real estate attorneys to adopt a combination of diligence, technology, strong internal controls, and trusted banking partnerships.
We live in a world where one missed detail can cost millions of dollars. Prevention is no longer optional; it is an integral part of delivering trusted legal counsel.
Stephanie Melowsky, Esq., is first vice president and attorney relationship manager with Orange Bank & Trust Company, Middletown, N.Y.