Fraudulent or faulty wire instructions from cyber criminals are affecting title professionals and closing agents across the United States. Here are two scenarios to consider: A title agent receives revised closing instructions from the seller/seller’s representative. The title company verifies the new closing instructions/wire routing numbers and wires the funds. A few days later, upon the buyer calling to ask where the money is for closing, it is discovered that the new wire instructions were fraudulent and the wired money is gone. The buyer of a house receives an email from a representative at their title/closing agency, giving them wiring instructions for their down payment. They wire the money per the instructions. When they eventually meet with the title agency, they find their money never arrived. The email they received containing wire instructions was fraudulent and the money is gone. The title company’s email had been hacked by cyber criminals. Insurance is available to protect the title agency/closing agent, but getting it is not as simple as adding a “wire fraud” endorsement to your policy. Here is what you need to do: Have a written, company-wide practice of verifying all wire instructions and revisions by phone. This includes reading the account number of the new wire and receiving verbal verification. This verification process is a warranty for most wire fraud policies, meaning that if you don’t do it, there will be no coverage. Purchase both Fidelity/Crime coverage and Cyber insurance coverage, and have a Wire Fraud endorsement coverage added to [...]

Do you have an action plan in place in the event one of your company’s email accounts is hacked? A recent incident with a Midwest-based title and settlement agent is prompting us to alert our clients to this issue. The particular company had several email addresses that handled a large number of files, for example, closings@abctitle.com. Unbeknownst to the title company’s tech team, and their third-party managed service provider, this email address had been hacked. Every time an email was sent from this account, a BCC (blind carbon copy) was also sent to an out-of-network email address. For several months, all the closing and banking information sent from the main account was also sent to an unsecured, unknown account. Once the title company discovered this breach, they were required, by state law, to notify each person whose information was unknowingly sent to this unsecured email address.This notice was required for everyone in the company’s database who could have been affected, whether or not the leaked information had been used, and was required to be completed within 30 days of the data breach being discovered. The title company never found out who received the unsecured emails—or if the responsible parties ever made any attempt to profit from the stolen information. The cost for these required notifications is $336 per person/record, on average, for the financial services industry and $274 per record for the generic services industry (according to the 2017 Cost of Data Breach Study by Ponemon Institute). Bear in mind, […]

Statistics recently gathered by Beazley Insurance indicate that in 2017 the average theft through fraudulent wiring instructions was $357,000. Some thefts were only a few thousand dollars; however, others were in the millions. Fraudulent wire instructions have become a significant threat to the well-being of title and closing agents. Even if your firm does not handle or wire closing funds, defrauded consumers and their attorneys may seek to involve all parties associated with the transaction. What are you doing to prevent fraudulent wiring instructions from being followed? How are you helping potential customers feel confident that you are safeguarding their money? Here are some risk management practices you might want to consider: Don’t rely on emails to receive wire instructions. Most title agencies have implemented procedures to call and verify email instructions that are received. If your clients’ only option is to email the wire instructions, you should first call to verify the account numbers. You should also know that talented fraudsters may be able to impersonate bank or other office personnel, so be wary. Make doing business with people you know a preference. While unrealistic for some, many agents manage their risk by predominantly dealing with attorneys, closing agents, and banks they know. Inform your clients, as many of them are not aware that fraudulent wire instructions are an issue. If they play any role in the transfer of their funds, be sure you have communicated clearly with them about this threat to their financial well-being. Aggressively educate your staff… Bear in mind that when […]

Does your organization have a Board of Directors or Senior Executives that help provide direction, influence decision making and help craft policy? Are you on such a board? By participating in such a capacity, somebody becomes personally liable for decisions that they make in that role. In light of the many high profile corporate scandals (i.e. Enron, Health South, Madoff) that have exploded since the late 1990s, elected officials have put the blame for these occurrences at the feet of the corporate leaders. Legislative actions have placed a heavy burden on these individuals to ensure the organizations that they oversee are run in a proper manner. Even if an individual acts in a volunteer capacity, and even if the organization is small, the personal assets of the leader(s) may be at stake. Are you asking yourself, “Do I have insurance for that?” Most people know that one component of a typical homeowner’s policy provides liability insurance; however the liability protection provided by such a homeowner’s policy is limited in scope. A homeowner’s policy is designed to respond to “Bodily Injury” or “Property Damage.” It could also be broadened by a “Personal Injury” endorsement which provides a defense against unintentional acts of libel or slander. An umbrella policy could be added to provide an additional limit of liability. These extra precautions are beneficial, and certainly have their place, but may not be helpful in the event of a claim arising from your activities as a board member of an organization. Such […]