Many times, these four little words can save you. In other words, get money quickly and send it out cautiously. Treat the closing like many individuals treat their personal finances. They are anxious to get their paycheck but may wait until the last day to pay their bills. The same can be true of receiving and sending your clients' money in your escrow account.
Careful, I did NOT say to delay in sending disbursements. After all, the interest meter is running every day that it takes that payoff to get to the bank. Your client is expecting that obligation to be retired immediately. Sellers are also expecting their proceeds quickly. The most important words in that statement are "expecting their proceeds," not the adjective "quickly." Before you send a six-figure disbursement of your own money anywhere, you probably stop and double check to make sure that everything is correct. It is time to ensure that we treat our clients' money with the same respect. If that outgoing wire is misdirected, it will feel like you lost your own money. Just ask any of your colleagues who have had to restore those funds when they have sent money to the incorrect place.
We understand that wires are a fact of life, and it isn't possible to just stop sending and receiving wires. What matters is that you limit wiring money to those instances in which it is absolutely necessary and that you put the proper controls in place when dealing with wires. Here are some things to consider regarding incoming and outgoing funds:
Wire In
- Only transmit your wiring instructions in a secure manner: in person, encrypted email, regular mail, or telephone.
- Inform the wire sender that you will never change your wiring instructions and direct them to confirm the wiring instructions by phone before sending. Note this policy in your engagement letter, email footers, wiring instructions, advertising materials, and verbal communications. Hit this point repeatedly.
- Do not involve anyone else in the transmission of your wiring instructions to the wiring party. Many times, realtors and others want to be involved in that process. Deal directly with the consumer or lender sending the funds so that you can ensure that the wiring instructions are properly delivered and confirmed.
Check Out
If you can send an escrow account check out, instead of a wire, you have more time to correct a problem and there are controls.
- Positive Pay is great. If you do not have it, get it.
- If you have Positive Pay, you have the opportunity to confirm or "white list" the check (but not a wire) before it clears your account.
- Positive Pay cannot stop a wire.
- Even without Positive Pay, you have 24 hours to stop a paper check from clearing.
- You can issue a stop payment order on a check. It is much tougher to recall a wire.
- Generally, the recipient has to have a bank account in their name when they negotiate a check. With some exceptions, a check must be taken to the bank to be deposited or cashed, which is not true of a wire.
- Do not use bank checks or certified checks for disbursements. If they are lost, they are difficult to replace and/or to issue a stop payment order on. Let the recipient go to the bank and exchange it for a bank check, if that is what they need.
Also "Check Out" All Outgoing Wires
- Follow W.I.R.E. - What I Require Every Time (click here): includes steps, policies, and procedures to consider before you send another wire out of your office.
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Proper identification
- Verify the identity of the recipient with independent information.
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Verbal Confirmation
- Call (old school on the phone) the properly identified individual to confirm wire instructions prior to initiating the wire. Do NOT trust email, whether encrypted or not, for wiring instructions.
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Delivery Verification
- Call (again on the phone) the wire recipient to confirm delivery. You know when it was sent and when it should be received. This is an extra step, but a valuable one.
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Outgoing payoff wires are still money leaving your account. Some say, "but it's to a bank." All wires go from bank to bank, including payoffs. They need to be treated as cautiously as wires to individuals. In fact, the numbers are usually bigger and, therefore, the financial risk is bigger.
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Request a written, signed, notarized original disbursement instruction, and authorization. (Samples available on request)
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If recipient is a bank or lender, they may not want to provide a signed disbursement instruction. Send them a check. If the wire is necessary, keep a list of verified lender payoff wiring instructions and refer to them before sending the next payoff wire to the same lender.
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If the wiring instructions are different from previous successful payoff wires to the same lender, investigate the difference prior to sending those funds.
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If the lender is not set up to confirm receipt of payoff wires, a follow-up payoff statement can be requested the day after the funds are received to confirm a zero balance.
What Else Can I Do? Educate Yourself, Your Team, and Your Clients
1)
Spread the Word about Cyber Fraud:
We have prepared consumer and client materials to assist with this process, and they are located at
https://www.nititle.com/fraud.
2)
Download and Use Our Other Resources Designed to Help You:
- C.Y.B.E.R. - Can You Be Entirely Ready (click here): includes steps, policies, and procedures to consider in formulating your Information Security and Escrow Account Security Plans.
- F.A.S.T. - Fast Action Stops Theft (click here): includes steps, policies, and procedures to consider in formulating your Cyber Fraud Response Team and your Cyber Fraud Response Plan.
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