It is a bit astonishing to think about how much money flows through the buying and selling of real estate in the United States each year, an industry that makes up a substantial portion of GDP and exchanges trillions of dollars in financing and fees for the services that support the industry.
The largest portion of those dollars are exchanged through wire transfers, and it is the number one responsibility of title and escrow agents to protect those funds against inadvertent errors, internal fraud and external actors who attempt to intervene in the transfers to make away with the funds illegally.
An important business practice, and one required by the ALTA Best Practices, is to review your wiring practices regularly, and take advantage of updated technology and new suggested protocols that can improve the safety of your funds in light of growing wire fraud threats.
Here are some best practices to consider when reviewing your wiring practices.
‘A goal without a plan is just a wish’
The #1 best practice is to have a robust set of policies and internal controls that guide long-term decisions as well as daily practices.
In addition, provide your staff with written, detailed procedures for initiating, approving and executing wire transfers. These should include:
Internal control processes or checklist that must be met before a wire is executed
Segregation of duties so multiple eyes are on the transfer
A step-by-step plan of action for employees who are suspicious of a transaction anomaly
Knowledge is power
Sitting in the C-suite sharing information about current scams is important in helping your managers craft policies for technology intervention or process changes, but make sure that information trickles down to every person who has anything to do with communication about wire transfers or the actual handling and overseeing of wire transfers.
Offer training every year on fraud schemes, social engineering and red flags
Make employees aware of the dangers of internal as well as external fraud
Encourage an environment of suspicion towards any aberrations uncovered
Detail an employee’s due diligence obligation for detecting and reporting fraud
Empower employees to take action or get help when they encounter questionable situations
Stuff happens The most assiduous company owners and manager may unwittingly fall prey to internal or external fraud impacting a client’s wired funds. Make sure you have proper insurance in place to protect you in the event of such unforeseen events. ALTA Best Practices requires that title companies have at a minimum errors and omissions insurance and fidelity or surety bonds as required by state law and that those insurances be adequate for the company's size and risk. Pillar 6 also recommends cyber liability insurance, according to company size and settlement volume. As you review your insurance needs, follow these best practices:
Read your policy annually to understand what is and is not covered
Work with your legal counsel if you need help interpreting any of the language of the contract
Consider additional coverage if you are concerned about growing threats
Make sure you are bonding your employees appropriately to mitigate any further liability
Outsourcing some of your financial functions can provide you with a valuable tool not only for segregation of duties, but also for having an impartial set of eyes on what is happening in your accounts. At Positively Balanced, our reconciliation services offer the most updated and secure procedures to meet all of your requirements for these important due diligence protocols. Call us today to learn more!