ALTA Title Topics Richard M. Reass CEO/President, RynohLive

Today’s Environment Rampant Fraud Staggering Losses – Check Fraud / Wire Fraud / Mortgage Fraud – Employee Embezzlement / Defalcation Agency Relationships Changing Regulators Outraged Lenders Seeking Protection NAIC Initiatives Failed Businesses Industry at-Risk

Escrow Standards Dated Advantage Criminal Monthly Reconciliation No Positive Pay Good Funds Ignore Banking Regulations Audit Standards Lax Inadequate Controls - Conflicting Guidance - Agent and Underwriter at Risk

New York Bureau of Insurance Anti-Fraud Task Force Findings

Raising The Bar Software - Systems - Procedures - Bank Automated Reconciliation Automated Reconciliation Positive Pay w/ Payee Match Positive Pay w/ Payee Match Online Bank Wiring /Cyber Protection Online Bank Wiring /Cyber Protection Robust Settlement Software Robust Settlement Software  Administrative Controls  Freeze Files  Track Changes  Prevent Disbursing Uncollected Funds Built-in Audit and Fraud Monitoring Built-in Audit and Fraud Monitoring

Escrow Standards Right Advantage Attorney/Agent Daily 3-way Reconciliation Daily 3-way Reconciliation Positive Pay Mandatory Positive Pay Mandatory Disburse Collected Funds Disburse Collected Funds On Line Banking Requirements On Line Banking Requirements Cyber Fraud Protection Cyber Fraud Protection Universal Audit Standards Universal Audit Standards “Insanity: doing the same thing over and over again and expecting different results.”

Escrow Management Practices Disbursing Control Disbursing Control o Settlement Software utilization o “Balanced” files o Funds Verification o Check Signing Factors Often Neglected by Agent Factors Often Neglected by Agent o Items “Banked but not Booked” o Negative File Balances o Pending Deposits o Retained Funds o Stale Dated Checks

Positive Pay Bank only clears validated checks Bank only clears validated checks –Payee Match or Non-Payee Match –Teller Line Positive Pay –Check Fraud - Who is Liable? UCC Sections 3-103(9) and Reasonable commercial standards Ordinary - Comparative Fault “Only Bank with Banks offering Positive Pay” -Frank Abagnale, ALTA Conf 2003

Remote Deposit Capture “The most important banking development in years” –The RDC Process  Scanner to Bank  Image Replacement Document –Agent Responsibility  Risks & Liabilities –Deposit Cut-off Times –Funds Availability  Late Closing

Disbursing Collected Funds “Irrevocably Credited” Good Funds ≠ Collected Funds Good Funds ≠ Collected Funds Expedited Funds Availability Act 1987 Expedited Funds Availability Act 1987 AZ citation AZ citation Underwriter Guidance Underwriter Guidance Statute Definition v. Bank Definition Statute Definition v. Bank Definition Banking Regulation CC Banking Regulation CC Collected Funds Legislation Collected Funds Legislation Limit Good Funds at Settlement Limit Good Funds at Settlement Illinois $50,000 Illinois $50,000 Utah, Indiana & North Dakota $10,000 Utah, Indiana & North Dakota $10,000 “All Good Funds Are Not Good” - RMR

Proxy Account Numbers (ZBA) Merely a pass through account Primary account protected –Wiring instructions used for check fraud Wires can’t be recalled –It happens despite Fed Wire rules ACH cannot occur ZBA Primary Account ZBA Primary Account

Malicious software spreads through s Malicious software spreads through s New variants each day go undetected New variants each day go undetected Steal login credentials Steal login credentials Modify wire and ACH transactions Modify wire and ACH transactions Thwart even the latest anti-fraud measures Thwart even the latest anti-fraud measures PC Target Of Attacks

Bank Wiring ZeuS, SpyEye, OddJob, and Ramnit.th Dual Controls Malware Protection!

NACHA & FBI Guidelines Dedicated Computer Dedicated Computer Banking Only Use Banking Only Use Malware Protection Malware Protection Automatic Updates Automatic Updates Strong Authenticatio Strong Authentication

Corporate Account Takeover Availability Exception Option Specifically, the Availability Exception Option Rule: Provides an RDFI that reasonably suspects that a credit Entry is unauthorized with an exemption to the Rules provisions requiring the RDFI to make certain credit Entries available to customers more quickly than required to under Regulation CC; and Requires the RDFI promptly to notify the ODFI if the RDFI makes use of this exemption to the funds availability requirements of the Rules. This exemption does not allow the RDFI to delay availability because of the RDFI’s own errors in processing an Entry.

The New Paradigm Daily Account Reconciliation Daily Account Reconciliation Positive Pay w/ Payee Match Positive Pay w/ Payee Match Collected Funds Collected Funds Expanded Review/ Oversight Expanded Review/ Oversight Reduces Disbursing Losses / Errors Reduces Disbursing Losses / Errors Virtually Eliminates Fraud Virtually Eliminates Fraud Thwarts Embezzlement Thwarts Embezzlement

Upcoming Events Business Strategies Conference, March in Louisville Go to for more information and to register