ESCROW STANDARDS ARE WRONG
in today’s environment of check and cyber fraud. The criminals have the upper hand.
Over the past few years the title industry has lost in excess of $1,000,000,000 due to agent/attorney defalcation and employee embezzlement. Underwriters have gone out of business because of fraud claims, agents shutdown because of defalcation or rendered insolvent because of employee embezzlement. Every day it seems that there is another announcement of an agency owner being indicted or convicted. Regulators and the public are outraged; Underwriter/agent relationships have changed; Our industry is under increasing scrutiny; and It will no longer be business as usual!
Ground Rules Must Change
Currently the agent is only required to reconcile monthly, and does not have to utilize Positive Pay™. Many states do not even require an annual audit! Most attorneys get a free pass altogether. On the other hand, the underwriter requires the agent to disburse only “good funds”. That can only be determined by reconciling the account to verify that the funds are on deposit and available for disbursement!
Conflicting Guidance
Further, “good funds” are not “collected funds”, and not all “good funds” are “good”. So unless all the funds being disbursed are collected funds, the agent is at risk. Indiana,
Illinois, and now North Dakota have passed legislation limiting the dollar amount of good funds that can be accepted at settlement. There should be an industry standard!
Best Practices / Ordinary Care
Banking regulations are such that unless the agent is: Reconciling Daily, Utilizing Positive Pay, and adhering to NACHA and FBI guidelines for online banking, they may, and likely will be held liable for any losses resulting from Check, ACH, or Wire Fraud in their escrow accounts. Please contact us at RynohLive to help you get your processes on track, and to protect the lifeblood of your company – your money!
