Anna Fender's offer to purchase a home for just under $100,000 was accepted by the seller. The purchase agreement indicated the buyer would deposit $10,000 into escrow, representing the earnest money.
The only contact information the listing real estate agent had for the buyer was an email address. The escrow officer, Sally, securely emailed wire instructions to the buyer. Soon, a wire for $10,000 posted to the wire board. When Sally claimed the wire, she noticed the originator was not the buyer, but a third party by the name of Owen Cash.
Sally notified the buyer and listing agent that she received the earnest money. The buyer immediately responded, notifying Sally of her intent to cancel the transaction. Fender claimed she was unable to travel to the U.S. due to COVID-19 and it was not a good time to tie up so much money.
Fender asked Sally if she could simply wire the $10,000 back to her once she received the fully executed cancellation instructions. Sally explained the funds must go back to the remitter, Owen Cash. Fender asked if the funds could be sent to her instead, since Owen Cash intended for her to use the funds for a different investment.
Sally consulted with management who advised the funds could not go to the buyer directly unless Owen Cash signed third-party deposit instructions. Sally relayed this information to Fender and asked for Owen Cash's contact information.
Fender provided an email address and phone number, and requested the instructions be signed electronically. Sally sent the instructions to Fender and Owen Cash for execution. Both signed electronically. Sally called Owen Cash using the provided contact information and confirmed his intent to send the $10,000 to Fender.
Next, Fender told Sally she had an upcoming deal in Texas and asked Sally to send the $10,000 to her attorney's client trust account. Sally stated she needed the attorney to provide wire instructions on their letterhead. Sally called the attorney to verbally verify the wire instructions and then sent the wire for the benefit of Fender.
A week later, Owen Cash contacted June, an escrow officer in the same operation, but at another branch. Owen Cash asked June why she had not confirmed receipt of his $10,000 wire. She contacted her Operation Accounting Center; the wire from Owen Cash was found but June learned the funds were claimed by Sally.
June asked Owen Cash if he was involved in another real estate transaction at another branch. He said he knew nothing about another purchase. June told him she found his wire and would send out a receipt.
June contacted Sally and was informed of the situation. They compared the contact information for Owen Cash, but none of it matched.
Fender had successfully defrauded the Company of $10,000. She rolled with any changes or roadblocks throughout the process. She originally wanted to send a fraudulent cashier's check, but pivoted flawlessly once she was advised of the misidentified wire.
When informed the funds would have to be returned to the remitter, Fender again aptly responded. She asked who the remitter was and then improvised to steal Owen Cash's money.
When asked for Owen Cash's contact information, Fender set up an email account and internet phone number for him. Fender signed the third-party deposit instructions using the email account and enlisted a co-conspirator to answer Sally's call.
As soon as the operation figured out what happened, Sally reached out to Fender's attorney, who received the $10,000 wire transfer. The attorney replied frankly, "funds were received. I am not at liberty to discuss disposition without Ms. Fender's consent; however, I can tell you that the funds are no longer in our possession."
The operation filed a loss to cover the account shortage and credited the real Owen Cash under the correct escrow number.
Be sure to post anticipated deposits for funds coming into your file from a buyer or seller or other party in the Wires Management Application (WMA). When a wire is received, always review the wire details. Confirm the escrow number matches and if the funds come from a third party, obtain third-party deposit instructions.
Proceed with caution when handling third-party deposits. Do not disclose the name of remitter of the funds to the principal. Ask them who remitted funds. Encourage the principal to tell you. Be cautious with parties you do not know or with limited contact information. Do not provide a roadmap for a fraudster.
If you have never dealt with the buyer or their real estate agent before, consider taking extra precautions to ensure the third party is properly identified and is, in fact, signing the instruction. Electronic signature may be acceptable with customers you know and regularly do business with. However, with new customers take precautions until you get to know them.
Use technology available to you. For example, set up a virtual meeting with the third party. Ask to view their identification and have them sign the instruction in front of you virtually.
Most video conferencing platforms can record and download virtual meetings, allowing you to save the video. Please note, however, that consent must be obtained from all participants to record any video call.
While on the video conference, you can have the individual scan and email the form back to you. This can be done with most smart devices, such as phones or tablets. Step-by-step instructions are available on request for our direct operation employees.
Consider adding a notarial certificate to the instructions as another safeguard. Third-party deposit instructions are not recorded and not relied upon for insuring purposes. Therefore, the notary does not have to meet the Company's underwriting requirements.
Alternatively, the signing can be booked through a Company-approved remote online notarization (RON) provider, even if you are located in a state without an enacted RON law.
Trust your escrow gut. If you are uncomfortable with the circumstances, implement a more stringent procedure. If you need ideas or suggestions, contact email@example.com. Your National Escrow Administration team is here to help and to support your decision.
Article provided by contributing author:
Diana Hoffman, Corporate Escrow Administrator
Fidelity National Title Group
National Escrow Administration