Trust Account Security

  • Do I have to complete background checks on my employees who have worked for me for a long time?
    The American Land Title Association’s Best Practices recommend five-year background checks be performed every three years on employees who have access to the trust accounts.  It also recommends that a five-year background check be completed on all new hires who will have access to the trust accounts.
  • I received a call from the seller’s lender telling me to wire the payoff funds in a specific transaction to a different bank account. The caller knew all of the details about the transaction, including the closing date, payoff amount, per diem, and seller’s account number. Can this still be fraud?
    Yes, it can still be fraud.  It is not likely that a seller’s lender will unilaterally change the payoff instructions prior to closing.  In the rare case where this might occur, the lender will typically send any changes to the payoff instructions in writing.  When dealing with payoff information, establish contact information early in the transaction and rely on that information to verify changes.  If you happen to receive a change to the payoff instructions from a lender or other creditor, always call the institution to verify the changes.  Make sure to contact the institution using a phone number from its publicly available website, not the phone number listed on the suspicious payoff instructions, fax cover page, or e-mail correspondence.
  • I received a cashier’s check as part of a deposit for an upcoming transaction. The buyer is now asking for part of the funds to be returned by wire transfer because the check was for more than the required deposit. May I go ahead and refund the difference?
    No. Do not refund any part of the deposit until you have collected funds.  There are many fraudulent cashier’s check schemes as well as fake law firm trust account checks, fake corporate checks, and more.  This is one of the more common schemes that have been reported. 
  • What is the difference between wired funds and automated clearinghouse transfers (ACH)?
    Wired funds are monies that pass directly from one financial institution to another financial institution using the Federal Reserve’s Fedwire system. 

    ACH transfers are similar to an electronic check and use a “batch” system of payment.  The batch system means that instead of each transaction being handled individually as in a wire transfer, all the ACH transfers are sent to a centralized clearinghouse, held for a period of time, and then sent to the receiving bank at once in a batch.  This means that multiple transactions are processed simultaneously once or multiple times a day, depending on the bank.

    Wire transfers are generally more expensive than ACH transactions, many of which have no additional cost associated with them.  However, ACH transactions can take longer to process, because of their batch characteristics and they are less secure than wire transfers.  The identities of both the initiating and receiving parties to a wire transfer are generally verified, making a wire much harder to “fake.”