"Defalcation and theft are epidemic in the title industry because it's so profitable and so easy," according to Rafael Toledo, Jr., President of IDSnetwork, Inc. in Sanford, FL. An insurance fraud investigator for over 20 years, he says that escrow account fraud perpetrators are more likely to be owners than employees. "Sometimes it simply starts when an owner cuts their commission check before the deal closes or they need funds to make the payroll. Or maybe an employee has an overdue credit card bill."

One challenge is reconciling accounts often enough to recognize the theft or detect a pattern that would raise suspicion. The current standard is to reconcile escrow accounts monthly. All too often the person doing the reconciliation is the owner or a manager with the authority to disburse escrowed funds.

New York State, seeking to deter defalcations in the title industry recently formed a Mortgage and Title Unit within the State Insurance Department's Fraud Bureau. The move was spurred by the increase in defalcations including two cases under investigation where title company owners allegedly misappropriated more than $6.7 million.

According to the NY Mortgage and Title Unit there are several steps settlement agents can take to deter defalcations and theft:

• Don't insure behind a naked transaction.
• Submit accurate information on the HUD-1 form. Agents need to ensure that the HUD-1 form is accurate, truthful and in compliance with the lenders closing instructions.
• In purchase transactions, submit only the seller's proceeds. In refinance transactions, transmit only the borrower's loan proceeds.
• Send the payoff letter on the date of disbursement via certified mail or courier.
• Get an automated solution to monitor your escrow accounts through three-way and daily reconciliation of escrow accounts.

Looking for a solution?

More and more settlement companies are discovering the Rynoh solution.
Rynoh is a complete settlement industry escrow account management system that includes daily three-way escrow account reconciliation and reporting combined with positive pay banking options.
Rynoh helps to:

• Immediately identify and eliminate defalcation, embezzlement and check fraud
• Eliminate disbursing errors
• Maintain accounts at an "audit ready" level every day
• Track revenue daily to prevent losses and increase profitability

For more information and to talk with current Rynoh users contact Dick Reass at 877-467-9664 or e-mail dick.reass@rynoh.com. Visit Rynoh at www.rynoh.com.

Escrow and cyber fraud are becoming more and more prevalent throughout the title insurance industry, as agents question how best to protect themselves from threats. The answer to that question and more will be provided in October Research Corp.’s upcoming Webinar Combating Internal Fraud: People, Processes and Technology Firewalls. Read on for the details. (8/20/2010)

Recent cases of corporate identity theft and cyber fraud have put title agents on the alert concerning the safety of their overall business as well as their escrow accounts. Agents are scrambling to put more effective controls in place to build a stronger bulwark around their companies. What can agents do to ensure the safety of both their identity and their accounts against internal and external threats?

Online Account Best Practices:

• Reconcile and review all banking transactions on a daily basis.
• Initiate wire transfer payments only under dual control, with a transaction originator
and a separate transaction authorizer.
• Use tokens for all online transactions to provide an additional layer of authentication.

Computer systems best practices (including but not limited to):

• If possible, carry out all online banking activities from a stand-alone, hardened and completely locked down computer system from which e-mail and Web browsing (beyond the secure online banking site) is not possible.
• Be suspicious of e-mails purporting to be from a financial institution, government department or other agency requesting account information, account verification or banking access credentials such as usernames, passwords, PIN codes and similar information.
• Opening file attachments or clicking on web links in suspicious emails could expose the
system to malicious code that could hijack your computer.
• Install a dedicated, actively managed firewall, especially if they have a broadband or dedicated connection to the Internet, such as DSL or cable. A firewall limits the potential for unauthorized access to a network and computers.
• Limit administrative rights on users’ workstations to help prevent the inadvertent downloading of malware or other viruses.
• Install commercial anti-virus and desktop firewall software on all computer systems.
• Free software may not provide protection against the latest threats compared with an industry standard product.
• Ensure virus protection and security software are updated regularly.
• Ensure computers are updated regularly particularly the operating system and key applications with security updates. It may be possible to sign up for automatic updates for the operating system and many applications.
• Consider installing spyware detection programs.
• Recommend clearing the browser cache before starting an Online Banking session in order to eliminate copies of web pages that have been stored on the hard drive. How the cache is cleared will depend on the browser and version. This function is generally found in the browser’s preferences menu.

Online Best Practices (including but not limited to):

• Train staff with access to online accounts on best practices to be used online.
• Create a strong password with at least 10 characters that include a combination of mixed case letters, numbers and special characters and change that password regularly.
• Prohibit the use of “shared” user names and passwords for online banking systems.
• Use a different password for each website that is accessed.
• Never share username and password information for Online Services with third-party providers.
• Verify use of a secure session (https not http) in the browser for all online banking.
• Avoid using an automatic login features that save usernames and passwords for online banking.
• Never leave a computer unattended while using any online banking or investing service.
• Never access bank, brokerage or other financial services information at Internet cafes, public libraries, etc. Unauthorized software may have been installed to trap account number and sign on information leaving you vulnerable to possible fraud.