Settlement agents and attorneys have been doing business the same way for decades, but the business landscape is rapidly evolving, particularly for settlement agents. It’s well-known that the average settlement agent’s escrow account is susceptible to fraud, embezzlement, cyber attacks, and unintentional errors.
But why?
Over a decade ago, the title insurance/settlement industry faced scrutiny from lenders, legislators, and regulators due to perceived ineffective controls. Escrow theft was rampant, leading to a loss of confidence in the industry’s ability to self-regulate. The collapse of two regional underwriters in 2011 due to escrow theft by their agents prompted a comprehensive review by the National Association of Insurance Commissioners (NAIC) and other regulators.
Regulatory bulletins CFPB 2012-03 and OCC 2013-29 emphasized the responsibility for qualifying, monitoring, and overseeing third-party vendors relying on lenders, a role previously exclusive to title insurance underwriters. Underwriters and title agencies had to demonstrate robust controls to protect settlement funds swiftly.
Meanwhile, title agents continued handling escrow funds as they always had. However, this approach was no longer viable. Banks recognized that escrow theft carried reputational damage, revenue loss, claims, regulatory response, and remediation costs.
To establish effective financial control for agents, underwriters turned to Rynoh to mitigate embezzlement and losses of settlement funds while reducing the cost of insurance bonds. Immediate action and fundamental changes were necessary to safeguard the industry structure. Title agents updated internal processes, controls, and adapted to protect themselves from potential elimination as third-party service providers.
Much of your risk can be easily mitigated. By adhering to these simple escrow accounting best practices and leveraging Rynoh technology, your business, and your customers’ funds can be instantly safer.
🖥️ Ready For a Test Drive? Schedule a demo today!
Daily Three-way Reconciliation of All Escrow Trust Accounts
The complexities of daily three-way reconciliation for escrow trust accounts demand a strategic approach. Start by automating reconciliation processes using dedicated tools or software. This streamlines the matching of transaction records between the bank statement, general ledger, and escrow accounting system, reducing errors and saving time.
Establish clear roles and responsibilities through the segregation of duties. This division enhances internal controls, minimizing the risk of potential fraud. Daily monitoring is crucial – promptly identify and resolve discrepancies to maintain financial accuracy. Use standardized reconciliation templates to ensure consistency and completeness in these processes.
Document any discrepancies found during reconciliation. This documentation becomes valuable for audits and reviews to resolve outstanding items and prevent misstatements in financial records. Verify opening and closing balances as a fundamental step in the reconciliation process. Implement a review and approval process for reconciliations, adding a layer of scrutiny.
Does all of this sound completely overwhelming? Of course, it does. Enter Rynoh solutions, specifically RynohReport. Delivered daily, it serves as a comprehensive tool to identify and solve challenges in escrow account management. The Morning Report apprises agents of their escrow account status, tracking critical disbursements to mitigate financial and reputational risks. The Reconciliation Wizard easily identifies and addresses items preventing three-way reconciliation, offering corrective guidance, and enhancing overall financial security. Rynoh provides a proactive approach to safeguard against financial discrepancies, seamlessly integrating into daily workflows.
Electronic Verification of Reconciliation
Electronic verification is a modern-day standard of financial reconciliations, leveraging technology to ensure accuracy, efficiency, and security. The first act is automating verification processes, where tools and systems seamlessly confirm reconciliation data, reducing the risk of manual errors and expediting the verification process. As we proceed, data validation checks take center stage, ensuring the accuracy and integrity of financial data through rigorous validation of account numbers, transaction amounts, and other critical information.
Exception reporting adds a layer, highlighting discrepancies or anomalies for swift identification and resolution. Real-time verification will aid with the prompt identification of discrepancies. Meanwhile, robust encryption and security measures fortify against unauthorized access or data breaches.
To tackle every single step in this complicated process, RynohLive automates these electronic verification processes with finesse, offering a complete history of your bank account at your fingertips. This turnkey software retrieves cleared bank transactions and reconciles them against your accounting software daily, identifying anomalies like mistakes, potential fraud, or audit concerns. Endorsed by 90% of national and regional underwriters, RynohLive aligns with recommended escrow accounting practices, including daily three-way reconciliation and positive pay. As a regional underwriter’s top choice, RynohLive stands as a scalable solution, ensuring organizations can confidently navigate the intricacies of electronic verification, enhancing the accuracy, efficiency, and security of their reconciliation processes.
Use Positive Pay – Immediately
The main shield at your disposal when it comes to check fraud is Positive Pay, a service banks provide to safeguard organizations from unauthorized or altered checks. Automation is at the forefront of Positive Pay, ensuring the check issuing process is streamlined, and minimizing the risk of manual errors and delays.
Details, details, details…organizations are advised to provide comprehensive information about each issued check – from check number and date to payee and amount. Regular updates to the issued checklist and daily reconciliation allow for quick detection of discrepancies or unauthorized checks. The dual authorization process adds an extra layer of security, with staff trained on Positive Pay procedures ensuring the importance of timely and accurate submission.
Now, enter Rynoh, a star of this fraud prevention performance. Rynoh takes the stage, offering a solution to operational hurdles by providing fully automatic and synchronized Positive Pay transmissions to the bank. This ensures a seamless and efficient process for transmitting check information, addressing challenges related to regular submission and communication in the event of issues. Rynoh’s contribution enhances the effectiveness of Positive Pay, offering a streamlined and automated approach to protect against check fraud.
Track Your Disbursements Daily
In the intricate dance of financial management, tracking disbursements daily is key to financial management, but you will probably already know that. Have you established clear disbursement procedures? Definitive, standardized processes to maintain consistency and reduce the risk of errors? Implementing accounting software is a great way to implement real-time tracking and automated systems that provide accurate and up-to-date financial information.
Rynoh will make your organization a master at disbursement verification. Rynoh verifies all receipts and disbursements, offering a comprehensive solution that validates funds flowing into and out of each file. Critical payments specified by the organization are tracked precisely, and alerts are issued for items not posted for either payment or credit. Rynoh even goes beyond, alerting if funds have been deposited into the wrong account, contributing to an efficient, transparent, and goal-aligned disbursement process with its robust verification capabilities and critical payment tracking.
Establish Strong Cyber Fraud Protection
In the ever-evolving landscape of cybersecurity, robust protection against cyber fraud is pivotal for safeguarding sensitive information and preventing unauthorized access to systems and data. Regular security audits and risk assessments, spotlighting vulnerabilities in systems and networks to understand potential threats and weaknesses, should be top of mind. Multi-factor authentication (MFA) adds an extra layer of security by requiring users to verify their identity through multiple methods. Secure network infrastructure, regular software updates, and encryption of sensitive data contribute to the layers of defense. Incident response plans, regular backups, and vendor risk management further fortify the organization’s cybersecurity stance.
Don’t forget to conduct employee training to raise cybersecurity awareness and educate staff about phishing attacks, social engineering tactics, and strong password practices.
However, you can rest a little easier with RynohVerifi—an account validation solution that fortifies financial transactions against wire fraud. This cutting-edge solution offers real-time safeguards, integration with banks’ national early warning system, and seamless integration with the Rynoh platform. Verifi ensures that account numbers match payee information, providing a crucial layer of protection in the full suite of Rynoh services.
Create Automated Reports to Send to Your Underwriters
The creation of automated reports stands as a key factor in a streamlined and efficient decision-making process. Standardizing the format of automated reports ensures consistency and ease of understanding, creating a clear and well-organized framework for quicker analysis. Real-time data integration becomes crucial, providing underwriters with the most up-to-date information to base decisions on current and accurate data. You can also get customizable dashboards and exception reporting to add flexibility and efficiency, allowing underwriters to focus on relevant metrics and quickly identify areas that may require further investigation.
RynohLive—underwriting support. With RynohLive, agents can be monitored, audited, and verified 24×7 by underwriters. Rynoh’s reporting capabilities empower agents to compile customized alerts, serving as red flags to head off and eliminate check fraud, prevent disbursing losses, and deter embezzlement and other fraud. Furthermore, Rynoh allows underwriters, lenders, regulators, and auditors to establish alert criteria independently of agents, providing access to review escrow account activity and contributing to informed underwriting decisions.
🖥️ Contact Rynoh today and learn how our automated escrow and financial management software can help your business. Rynoh integrates with escrow accounting software and online banking systems to provide the industry’s gold standard in escrow & financial security software solutions. Rynoh offers continuous end-to-end accounting auditing, daily reconciliation, transaction monitoring, anti-fraud algorithms, and built-in automated reporting. Schedule a demo today!