ALTA Title Topics
Richard M. ReassRichard M. ReassCEO/President, RynohLiveCEO/President, [email protected]@rynoh.com
Today’s EnvironmentToday’s Environment
Escrow Standards DatedEscrow Standards DatedAdvantage CriminalAdvantage Criminal
Monthly Reconciliation
No Positive Pay
Good Funds
Ignore Banking Regulations
Audit Standards Lax
Inadequate Controls - Conflicting Guidance - Agent and Underwriter at RiskInadequate Controls - Conflicting Guidance - Agent and Underwriter at Risk
New York Bureau of InsuranceNew York Bureau of InsuranceAnti-Fraud Task Force FindingsAnti-Fraud Task Force Findings
Raising The BarRaising The Bar
Software - Systems - Procedures - BankSoftware - Systems - Procedures - Bank Automated ReconciliationAutomated Reconciliation Positive Pay w/ Payee MatchPositive Pay w/ Payee Match Online Bank Wiring /Cyber ProtectionOnline Bank Wiring /Cyber Protection Robust Settlement SoftwareRobust Settlement Software
Administrative ControlsAdministrative Controls
Freeze FilesFreeze Files
Track ChangesTrack Changes
Prevent Disbursing Uncollected FundsPrevent Disbursing Uncollected Funds
Built-in Audit and Fraud MonitoringBuilt-in Audit and Fraud Monitoring
Escrow Standards RightEscrow Standards RightAdvantage Attorney/AgentAdvantage Attorney/Agent
““Insanity: doing the same thing over and over Insanity: doing the same thing over and over again and expecting different results.”again and expecting different results.”
Escrow Management PracticesEscrow Management Practices
Disbursing Control Disbursing Control o Settlement Software utilizationo “Balanced” fileso Funds Verificationo Check Signing
Factors Often Neglected by AgentFactors Often Neglected by Agento Items “Banked but not Booked”o Negative File Balanceso Pending Depositso Retained Fundso Stale Dated Checks
Positive PayPositive Pay
Bank only clears validated checksBank only clears validated checks
– Payee Match or Non-Payee Match
– Teller Line Positive Pay
– Check Fraud - Who is Liable?• UCC Sections 3-103(9) and 3-406
• Reasonable commercial standards
• Ordinary - Comparative Fault
““Only Bank with Banks offering Positive Pay”Only Bank with Banks offering Positive Pay”-Frank Abagnale, ALTA Conf 2003 -Frank Abagnale, ALTA Conf 2003
Remote Deposit CaptureRemote Deposit Capture
““The most important banking development in years”The most important banking development in years”
– The RDC ProcessThe RDC Process Scanner to BankScanner to Bank
Image Replacement DocumentImage Replacement Document
– Agent ResponsibilityAgent Responsibility Risks & LiabilitiesRisks & Liabilities
– Deposit Cut-off TimesDeposit Cut-off Times
– Funds AvailabilityFunds Availability Late ClosingLate Closing
Disbursing Collected FundsDisbursing Collected Funds“Irrevocably Credited”“Irrevocably Credited”
Good Funds ≠ Collected FundsGood Funds ≠ Collected Funds• Expedited Funds Availability Act 1987Expedited Funds Availability Act 1987
• AZ 6-843 citationAZ 6-843 citation
• Underwriter Guidance Underwriter Guidance • Statute Definition v. Bank DefinitionStatute Definition v. Bank Definition• Banking Regulation CCBanking Regulation CC
Collected Funds LegislationCollected Funds Legislation• Limit Good Funds at SettlementLimit Good Funds at Settlement• Illinois $50,000Illinois $50,000• Utah, Indiana & North Dakota $10,000Utah, Indiana & North Dakota $10,000
““All Good Funds Are Not GoodAll Good Funds Are Not Good” - RMR” - RMR
Proxy Account Numbers (ZBA)Proxy Account Numbers (ZBA)
• Merely a pass through account
• Primary account protected– Wiring instructions used for check fraud
• Wires can’t be recalled– It happens despite Fed Wire rules
• ACH cannot occur
ZBAPrimary Accoun
t
• Malicious software Malicious software spreads through emailsspreads through emails
• New variants each day go New variants each day go undetectedundetected
• Steal login credentialsSteal login credentials
• Modify wire and ACH Modify wire and ACH transactionstransactions
• Thwart even the latest Thwart even the latest anti-fraud measuresanti-fraud measures
PC Target Of PC Target Of AttacksAttacks
Bank WiringBank Wiring
ZeuS, SpyEye, OddJob, and Ramnit.thZeuS, SpyEye, OddJob, and Ramnit.th
Dual ControlsDual Controls
MMalware Protection!alware Protection!
NACHA & FBI GuidelinesNACHA & FBI Guidelines
Dedicated ComputerDedicated Computer
Banking Only UseBanking Only Use
Malware ProtectionMalware Protection
Automatic UpdatesAutomatic Updates
Strong AuthenticatioStrong Authentication
Corporate Account TakeoverCorporate Account TakeoverAvailability Exception OptionAvailability Exception Option
Specifically, the Availability Exception Option Rule:
Provides an RDFI that reasonably suspects that a credit Entry is unauthorized with an exemption to the Rules provisions requiring the RDFI to make certain credit Entries available to customers more quickly than required to under Regulation CC; andRequires the RDFI promptly to notify the ODFI if the RDFI makes use of this exemption to the funds availability requirements of the Rules. This exemption does not allow the RDFI to delay availability because of the RDFI’s own errors in processing an Entry.
The New ParadigmThe New Paradigm
Daily Account ReconciliationDaily Account Reconciliation
Positive Pay w/ Payee MatchPositive Pay w/ Payee Match Collected FundsCollected Funds Expanded Review/ OversightExpanded Review/ Oversight Reduces Disbursing Losses / ErrorsReduces Disbursing Losses / Errors
Virtually Eliminates FraudVirtually Eliminates Fraud
Thwarts EmbezzlementThwarts Embezzlement
Upcoming EventsUpcoming Events
• Business Strategies Conference, March 25-27 in Louisville
• Go to www.alta.org/meetings for more information and to register