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By Benjamin H. Barron
When dealing with mail-away closings, remote closings, and wire transfers in general, here are some best practices I suggest implementing at your firm:
Make sure that you have an adequate disclosure statement within your email as to the prevalence of fraud. For example:
Involving Incoming Wires (from client to closing attorney/settlement agent):
Make sure from the outset of the transaction that we, as the closing attorney/settlement agent, alert all parties (including the buyer(s), seller(s), real estate agent(s), and/or lender) of the methods of payment that are acceptable (i.e. certified check or wire transfer) and that we, as the settlement agent, will never require that the settlement funds be wired into our trust account.
Inform the parties to the transaction that, in the event settlement funds will be wired into the closing attorney/settlement agent’s account, they or their client should:
Confirm verbally (via telephone) with the closing attorney/settlement agent the accurate account numbers, routing number, and receiving bank of your lending institution where the funds are to be delivered;
After verbally confirming the information, follow up via a secondary form of communication, namely an email to a party involved in the transaction that the client knows is an accurate email, to further verify that the client has spoken with the appropriate party;
Have the party contact their lending institution to determine what their safety protocols are with regard to the wiring of funds; (Specifically, do they verify independently of the client’s request?)
After satisfying themselves of their lending institution’s procedures and confirming that the wiring instructions supplied are legitimate, authorize the wiring of the funds;
Have the party closely/diligently monitor their account for the outgoing wire; and
As soon as the funds are withdrawn from the account, re-verify with the closing attorney/settlement agent that the funds have been received.
NOTE: The quicker you catch the fraud, the greater success in possibly retrieving the funds because fraudsters are monitoring their account(s) constantly and, normally, as soon as it is received, it is wired out to an overseas account.
Involving Outgoing Wires (from the closing attorney/settlement agent to seller or party receiving funds via wire transfer):
1. Inform the party(ies) of the prevalence of wire fraud in today’s society;
2. Inform the party(ies) of the complete necessity of making sure that all information supplied to the closing attorney/settlement agent is accurate (via calling their lending institution and speaking with an actual human being to confirm the information);
As the closing attorney/settlement agent, you cannot rely simply on a voided check. You must get additional information.
NOTE: One number off can make an impact and route the funds into an improper account.
3. Supply the party(ies) seeking their funds to be wired with a Wire Request Form that must be completed and signed/dated by them (example attached);
Make sure to have a limitation of liability provision within the Form.
4. Prior to initiating the wire, as the closing attorney/settlement agent, call and verify with the party's(ies') lending institution that the information supplied by the party(ies) via the Wire Request Form is correct to the best of their knowledge;
5. Initiate the wire;
6. Monitor the outgoing wire; and
7. Ask the party(ies) to monitor their account and contact the closing attorney/settlement agent once the outgoing wire is received.
Resources:
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About the Author: Benjamin H. Barron
Benjamin is a 2008 Graduate of Cumberland School of Law. He joined Lee, Livingston, Lee, Nichols & Barron, P.C. of Dothan, Alabama, in 2011. He is primarily focused on the firm’s transactional practice. Ben is married to Elligrace (Clark) Barron, and they have three children: Elle, Huff, and Libby.