A large portion of the mortgage industry still tries to understand, let alone deal, with wire fraud caused by business email compromise schemes. Mortgage industry pioneer Regina Lowrie's newest company, Dytrix, looks to provide lenders with some preventative measures to halt these scams.
Lowrie served as the first woman
So in 2019, Lowrie launched Dytrix, which performs validations of a bank account's owner, account number, time the account has been opened and ABA number. It authenticates that the recipient is the owner of that account and then goes one step further and checks the domain of the email address that the lender receives and the country domain to make sure the account has not been intercepted.
Below are excerpts from a discussion with Lowrie at the MBA's annual convention in Austin, Texas. The questions and responses have been edited for clarity and length.
Is the industry starting to get concerned about wire fraud? While there have been some efforts like
Little by little, the industry is starting to recognize it. We are waging war against this issue. I'm pretty passionate about it. Back in the day when I had Gateway, we didn't think twice about wiring hundreds of thousands of dollars to a bank account without validating it. But clearly our industry
The interesting thing is, the closing protection letter and the error and omissions insurance does not cover wire fraud. It also does not cover any privacy breeches of consumer data. So what Dytrix is doing is focusing on making it a secured financial transaction by validating the wire and we're also qualifying the closing agent and giving the lender some recourse against the closing agent for privacy violations.
This isn't a new problem for the mortgage industry, but many seem unaware of what's been going on.
I've been working on this now for almost four years. One of my clients, a fairly large bank in Pennsylvania reached out to me after an Office of the Comptroller of the Currency audit. And they had a very robust vendor management program for third parties, but the OCC wanted to know how they were managing closing agents and they weren't doing anything.
Most of my clients have
From an efficiency perspective, we cover a number of things. We mitigate the lender's risk, both financial risk and reputational risk.
But we're also
Right now, some of the defense mechanisms include emails from closing agents with messages in big red letters warning consumers about changes in wire instructions. Is that just a Band Aid?
I recently got an email from the CEO of Homebridge and all over their emails it says 'we do not send emails regarding wiring instructions.' So the warnings are all over. You know I love this industry and I am very passionate about it, but I have to say that we're not very proactive, we're reactive as an industry.
I think longer term solution is as the industry is moving towards a digital environment, everything will
Does the switch to a digital process environment make things safer or does it up the risk?
That's why there is such a big interest in blockchain. The U.S. Department of Defense has said the biggest threat to the U.S. is not North Korea or Russia, it is a cyberattack
People have lost homes they were trying to purchase because their down payment funds were diverted.
It's daunting to go through the process, especially for
Most larger institutions have cybersecurity insurance policies in this day and age. What I've come to learn is, it will cover wire fraud, but there's an exclusion if your employee wired the money. If you can demonstrate that you have validated it before you wired it, then you show your fiduciary responsibility under the policy. But if your employee is the one that wires and it ends up going into a fraudulent account, most cybersecurity insurance policies won't cover you.
The other thing — cybersecurity insurance is very expensive. So you're not going to find small and mid-sized players getting cybersecurity insurance.