New Twists To An Old Scam

By Lisa A. Tyler
National Escrow Administrator

There are a few new twists to the scam involving out-of-country buyers making offers to purchase property, sight unseen, and then mailing counterfeit checks to the settlement agent for the full purchase price. If you'll remember in previous stories involving this same scam, the buyer would request the settlement agent deposit the check and provide notification when it cleared the bank. Then, the buyer would send
e-mails every day demanding a wire transfer for the monies remitted over and above the deposit required by the purchase contract instructing the money be sent to a bank in China to purchase furniture for a new house.

That scam has been largely unsuccessful, except in a few instances where the settlement agent fell for the scam and sent the wire. Those settlement agents do not work for our Company. As a result of the largely unsuccessful results the fraudster is now putting some new twists to the transaction. Stay abreast of the new warning signs by reading "New Twists To An Old Scam."

Have you ever had a buyer complain about the title insurance premiums charged at closing? If you have, then you will want to read "Title Insurance - Is It Worth It?" This story provides the perfect example of how our title insurance protected one of our own employees who fell victim to fraud in a recent purchase of investment property. Then the next time you hear that same complaint, you'll have the perfect retort.

As the largest title company in the world our Company often becomes the target of all kinds of crimes including cyber scams. As a result the Company invests a lot of money into our systems containing employee and customer information, to protect against the threat of hackers. Be sure to read the article entitled "Information Security" to find out about the Company's efforts to thwart other types of crimes not just those occurring at the closing table.

We've been working on a mission statement to share with our readers through Fraud Insights. Let us know what you think of it.

Mission Statement: Together we will pledge to eradicate the evils of bribery, corruption, selfishness, immorality, dishonesty and misconduct in the real estate industry. It is not appropriate to turn our heads, close our eyes or cover our ears when we become aware of a corrupt kickback arrangement. We settlement agents, title officers, real estate agents, transaction coordinators, secretaries and brokers of record, must take pride in who we are and clean up our real estate industry by speaking out.

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New Twists To An Old Scam

You know the tell-tale signs of this old scam; it starts when the checks arrive via overnight delivery. The branch deposits the checks and waits for them to clear the bank, only to have them returned as counterfeit. We've written four previous articles informing all offices of this scam so you can recognize it and shut it down, before sellers and agents suffer damages. But just when we think we've got the crooks out-smarted they try something new!

The counterfeit check scam has been attempted, literally hundreds of times, at our offices in nine different states. Warning signs we've seen in previous transactions are:

  • Buyers' names are foreign, for example, "Zilei" and "Xainghong"
  • Buyer makes a full-price/all-cash offer on an existing listing with a quick closing date
  • Buyer makes the offer to purchase the property sight-unseen
  • Buyer communicates with the agent via e-mail only no phone number or address provided
  • Agent sends the purchase contract to the buyer via e-mail
  • The buyer signs the contract and returns it to the agent with a check made payable to the settlement for the full purchase price instead of the required deposit
  • Buyer usually uses a cashier's or corporate check drawn on a Canadian bank
  • Purchase price exceeds $700,000
  • Buyer contacts our office after sending the funds and directs the settlement agent to wire transfer everything over and above the required deposit instructing them to be sent back to a bank in China to purchase furniture for a new house

The people who have suffered most have been the sellers losing valuable time on the market only to have their sales fall through.

As a result of the above scam we have directed our offices not to accept checks drawn on foreign banks for several reasons:

  • Check has to go through a correspondent bank in the foreign country it is drawn on and they charge us processing fees
  • We cannot verify with the foreign bank if the check is a valid issue
  • It takes more than 30 days for a check to be returned and stamped "counterfeit" by the issuing bank if it is returned at all!

This year, because we would no longer accept checks drawn from Canadian banks, the fraudsters started sending counterfeit checks drawn from domestic banks such as Dover Federal Credit Union and Citibank. The good news is our offices were able to immediately confirm with the issuing bank the item was counterfeit and resign from the transaction.

Deana Coulter, with Chicago Title's La Jolla, Calif. office, recently opened one of these transactions and encountered one of the latest twists to the scam. The sale price for the property was $720,000 and the buyer contacted our offices for our wire transfer information.

Days later, the office was notified by the accounting department of a deposit to the trust account for which no matching receipt was posted in their system. Deana contacted the bank for evidence of the deposit only to find out the buyer sent a deposit of $450,000 (not the full purchase price, but still more than the required deposit) directly to the trust bank by mail.

The check that was deposited was drawn off the Royal Bank of Canada from the account of Intact Insurance Company a party totally unrelated to the transaction. On the very same day Deana received an e-mail request from the buyer, "Qi Lee," instructing her to send a wire in the amount of $225,000 to his wife's attorney in Japan. He indicated in the message that he was in Japan going through a divorce and he and his soon-to-be ex-wife settled on that amount.

Deana responded that the check had not cleared the bank and if he wanted an immediate wire, he should put a stop payment on the check and send a wire transfer instead. Qi Lee responded he couldn't stop pay the check because it had already cleared his bank. He then sent the following e-mails as proof:

From: qisue1@aol.com
Date: Thur, 19 May, 2011 12:55:01 -0500
To: <hillary.brooks@royalbank.com>
Subject: Account update

Please confirm if you have cleared the check issued to Chicago Title Escrow. - La Jolla, CA Office for $450,000.00USD

Thanks

Qi Lee

From: Hillary Brooks <hillary.brooks@royalbank.com>
Date: Thur, 19 May, 2011 at 1:30 PM
Subject: Clear funds
To: qisue1@aol.com

ROYAL BANK OF CANADA
200 Bay Street, Toronto, Ontario M5J 2J5,
Canada

Attn: Qi Lee

We can only disclose this information to you because you are our customer, please forward this email to your escrow office. This is to confirm to you that the check of $450,000.00 (Four Hundred and Fifty Thousand US Dollars only) issued to Chicago Title Escrow . - La Jolla, CA Office has cleared our bank.

Payment of $450,000.00USD was credited today 19/05/2011 to Union Bank Account No:9101051077 with Ref Escrow No:73711004745-DC.

Regards,
Hillary Brooks
Accounts Officer

Deana and her accounting manager contacted the trust bank which confirmed the check that was direct deposited had been returned by the Royal Bank of Canada as counterfeit. Deana informed Qi Lee of the bank's notification. This was his response.

YOU ARE A F&%$#*% B#@%&$*, I CANCEL THE TRANSACTION THAT WAS WHY THE CHECK BOUNCE BECAUSE YOU WANTED TO RUN AWAY WITH MY MONEY B$%@*%*.

REGARDS

QI LEE

As a result of Deana's experience and expertise in the industry, she recognized the scam and took the extra steps necessary to shut it down. She also endured the offensive e-mails from the buyer and kept a professional demeanor. For all her efforts the Company has selected her as a Fraud Insights reward recipient and given her $1,000 as well as a letter of recognition.

In summary, the new twists are as follows:

  • Deposit does not match the full purchase price, but is still more than the deposit required in the contract
  • Check is sent directly to the trust bank for a direct deposit
  • Buyer is going through a divorce and has reached a settlement agreement with his soon-to-be ex-spouse

This scum I mean scam has spread across the U.S. and has become epidemic. The Company has been unsuccessful persuading law enforcement to assist in shutting it down. You need to keep your guard up and look for the tell-tale signs shared in this story.

If a check is direct deposited at the bank, make sure to review a copy of it. If it is drawn from a foreign bank, ask the bank to reject the deposit and demand a wire transfer from the buyer.

Most importantly, share this story with your real estate agent customers, so they too can recognize the warning signs and stop the transaction before it reaches us.

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Title Insurance - Is It Worth It?

One of Fidelity's senior escrow officers recently purchased an investment property for all-cash with her brother. After closing, they renovated the property and found tenants who would sign a long-term lease. Six months later, the property was foreclosed upon by Bank of America and the escrow officer and her brother almost lost their investment!

Fortunately for the escrow officer and her brother, they purchased title insurance from Commonwealth Land Title at closing. They immediately notified the claims department of their loss. The claims officer began researching how the buyers could have lost the property to foreclosure when they had not mortgaged the property in the first place.

What he found was shocking. In 2010 the original owners fell on hard times and stopped making payments to Bank of America on both their mortgage and Home Equity Line of Credit (HELOC) as evidenced by more than one recorded Notice of Default in public records. Shortly thereafter the owners recorded a Substitution of Trustee and Deed of Reconveyance for each loan. These documents purportedly released the two Bank of America loans. They were supposedly signed by an authorized representative of BAC Home Loan Servicing, LP, but were not signed in the home office of Bank of America. Instead these two releases were signed, according to the notary, in Placer County, Calif.

Next, the property owners deeded their (now free and clear) piece of property to a company, called Atlus Equity, LLC, which subsequently listed and sold the property to our escrow officer and her brother for $190,000. The tenants living in the property received Notice of Trustee's Sale and stopped making their monthly rent payments to save for an impending move once the foreclosure occurred.

In the meantime, the escrow officer and her brother have been working with the claims officer to settle with Bank of America to deed the property back to them. The Trustee's Deed Upon Sale states the bank is due $189,000. The claims department is standing by to write the check to Bank of America in exchange for their deed.

Sadly, after a search in the claims system, we have discovered this same scam has been pulled by the same individuals at least five times leading up to this claim.

Moral Of The Story
Always be suspicious of free and clear property. Investigate the event that lead to mortgages being paid in full. Review recorded lien releases and investigate their authenticity if they appear to be executed outside of the main lender office. We all can take part in protecting the Company and those we insure against this type of crime.

 

Information Security

Catching a fraudster in the act is always exciting. This publication is dedicated to spreading the word about the latest and greatest schemes and rewarding those who uncover fraudulent activity. National Escrow Administration acts quickly to obtain all the facts in order to publish the story in an effort to notify settlement agents nationwide so they can also identify the scams. As the largest title company in the world our Company often becomes the target of this fraudulent activity.

Preventing fraudulent activity is equally important. Our Company invests heavily in security. The Compliance and Security Department is constantly staying one step ahead of the fraudsters in an effort to protect the information and funds on deposit. They have written policies and procedures designed to keep our Company secure. Policies such as:

  Computer Users Security Policy
Anti-virus Policy
Password Policy
Wireless Access Policy
Personal Communication Device Policy
Remote Access Policy
Removable Media Policy
Blogging and Social Networking Policy
Social Media and Networking
Secure Laptop Use
Risk Management
Third-Party Service Provision
Data Disposal
Secure Laptop and Desktop Systems
Use of Cryptographic Technology
Application Security
Network Security
Computer Systems Security
Business Continuity Planning
Physical Security
Incident Response Plan

All of these policies include common sense steps to take which should be applied at work but can also be applied in your personal life. For example, the Secure Laptop Use procedure describes simple ways to keep a laptop safe while staying in a hotel. The policy recommends buying a laptop lock and securing the laptop to a piece of furniture. This is something easy and inexpensive anyone traveling with a laptop can do to protect their property and deter someone from stealing it.

Additionally, the Compliance and Security Department has put together a Corporate Information Security Website available through the Company's Intranet. To find the Website employees can log into the Intranet at home.fnf.com. Under FNF Info click on Compliance & Security from the home page and select The latest security news. You will be required to log back in using your same Intranet login credentials. Posted to this site are the policies referenced above and timely cybercrime news articles. Here is a sampling of some of the headlines:

  "5 Tips to Avoid Getting Phished"
"FBI Warns of Cyber Scams to Watch Out For This Holiday"
"Mind Games: How Social Engineers Win Your Confidence"
"Top 10 Security Nightmares of the Decade"

The Internet has proven to be an excellent tool, but with it comes new forms of crimes. Through the Internet we are now all familiar with terms such as phishing, cybercrime, data breach and botnet. If you do not know what all of those terms are, check out the Corporate Information Security portal. It contains information about how to prevent being a victim personally and professionally.

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