The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) on Feb. 7 to expand its efforts on a permanent basis to combat and deter money laundering through the residential real estate sector.
According to the FinCEN announcement, the proposed rule would require professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate to legal entities and trusts.
“Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices,” said FinCEN Director Andrea Gacki. “Today marks an important step toward not only curbing abuse of the U.S. residential real estate sector but safeguarding our economic and national security.”
Expansion of GTO efforts
Since 2016, FinCEN has issued multiple Geographic Targeting Orders (GTOs) requiring title insurance companies to file reports on all-cash purchases having specific dollar thresholds in designated geographic areas. These GTOs last for six months at a time. The most recent GTO was issued in October 2023 and expanded the list of affected venues.
According to FinCEN’s proposed rule, expanded reporting requirements would apply on a permanent basis across the entire country, without limit to specific geographic locations or a dollar threshold. The agency will accept comments on the new proposed rule for a 60-day period following its publication in the Federal Register, scheduled for Feb. 16. According to the American Land Title Association’s (ALTA) blog of Feb. 8, FinCEN has proposed that the final rule become effective one year after it is issued.
“We are still reviewing the proposed rule and will work to ensure that FinCEN considers the information they are collecting under the new Beneficial Ownership rule, among other things, so as not to be unnecessarily duplicative and also provide clarity regarding the obligations of all real estate parties under the rule,” said Diane Tomb, ALTA’s chief executive officer. “We also appreciate, and intend to continue, the ongoing dialogue with FinCEN to craft a tailored approach limiting the transactions that must be reported to those of the greatest concern and providing avenues to help reduce the compliance burden on title and settlement companies.”
Proposed reporting structure
The proposed rule would require reporting on transfers of single-family houses, townhouses, condominiums, and cooperatives, as well as buildings designed for occupancy by one to four families. Going a step beyond the GTOs, it would also require reporting on transfers of vacant or unimproved land that is zoned, or for which a permit has been issued, for occupancy by one to four families. Furthermore, both purchasing entities and transferee trusts are reportable unless a specific exception is applicable.
ALTA’s Feb. 8 blog summarizes reportable information under the proposed rule to include (but is not limited to) the following:
Name, address and taxpayer identification number (TIN) for the transferee and transferor.
Beneficial owner information for the transferee and anyone signing the transfer documents. (names, date of birth, addresses and TINs for those individuals).
Name, DOB, address and TIN for all transferors on title or the beneficial owners if the seller is an entity.
Address and legal description of the property.
information about the payments made by or on behalf of the transferee.
Information about any hard money or other lender not subject to anti-money laundering rules. That participated in the deal.
Individuals representing the transferee entity or transferee trust.
The business filing the report.
For a more detailed summary of requirements and exceptions under the proposed rule, please see the Fact Sheet published by FinCEN. At Alliant National, we are committed to keeping you updated on legislation and regulations that affect your business. Stay tuned for more, as the comment period progresses.
Alliant National’s Crime Watch Program is a great example of the old saying that the best defense is a good offense. Designed to incentivize Alliant National’s policy-issuing agents to detect and prevent fraud, the program had a banner year during 2023. Working together, Alliant National’s network of agents prevented scores of fraudulent transactions from going forward over the past 12 months. These efforts not only protected against sizable losses but helped promote a safer and more secure industry. Now that the year has wrapped up, let’s dig into the numbers.
A problem of incredible scope
With property information readily available with a click of the mouse, it is easier than ever for bad actors to research and identify potential targets. The result has naturally been a huge uptick in criminal activity over the last few years. In fact, FBI data indicates that “more than 13,000 people were victims of wire fraud in the real estate and rental sector in 2020, with losses of more than $213 million — an increase of 380% since 2017.”[i]
Fighting fraud requires all hands on deck
To help empower independent agents and assist the title industry in combating fraud, Alliant National initiated its Crime Watch Program several years ago. The initiative rewards agents $1,000 each time they prevent a fraudulent transaction – and the results have been impressive. Year after year, Alliant National’s agents have helped stem the tide of criminals targeting the industry, identifying fraudulent behavior and saving consumers from financial loss and unnecessary stress.
During the program’s lifespan, we’ve seen a number of best practices to help prevent fraud:
Never accept wire instructions over email.
Double-check all contact information. Then, check it again.
Always send wire instructions through a secure, encrypted communication channel.
Pay particular attention to any last-minute changes with a transaction, especially with wire transfer information.
Speak directly to clients to make sure they are who they say they are.
Become as familiar as you can with the history of the property you’re working with and watch for any irregularities.
Stay current with all continuing education classes to remain apprised of the latest developments in title fraud and cybercrime.
Trust your gut when something feels off and work closely with colleagues to have a unified front against fraudsters.
Use real world examples of fraudulent activity to educate colleagues or employees on how to spot fraud.
Have a response plan in place if a fraudster is able to get around your agency’s defenses.
2023 was a successful year of fraud busting
For Alliant National’s Crime Watch Program in 2023, past successes were prelude to a tremendous year of fraud busting. Collectively, agents identified and prevented over 25 instances of fraud, totaling more than $280 million in proposed liability. The agents involved in stopping these fraudsters came from a variety of states – including Florida, Missouri and Texas – and the specifics of each fraudulent transaction also ran the gamut. Some of the top schemes encountered by agents included:
Business email compromise
Seller impersonation
Fraudulent contracts
Fraudulent documents like passports
Fraudulent cashiers’ checks
Let’s stop fraudsters in 2024
Everyone has their own New Years’ resolutions, but for the title insurance industry, one of the most important should be taking all available actions to detect and ultimately prevent fraud. Since the inception of Alliant National’s crime watch program, we have seen how powerful it is when agents proactively address suspicious transactions. While not all fraud can be prevented, the program is a testament to what the industry can do when it unites against criminals.
Want to learn more about Alliant National’s crime watch program and how your agency can get rewarded for stopping fraudsters? Start here.
Brick City Title, a full-service title insurance agency, is a loyal member of the Ocala, Florida, business community and dedicated to protecting the integrity of its customers’ transactions. This commitment served them well recently when a fraudulent transaction came across the desks of two of the agency’s title professionals. By working together and proactively communicating with other transaction stakeholders, the agency foiled the fraudster and received recognition through Alliant National’s crime watch program, which offers a $1,000 reward to agents who help prevent a fraudulent transaction from closing.
A suspicious package
When the package first arrived from the buyer, Brick City Title’s Gina Preston and Cherie Breitenbecker felt like it was a step in the right direction. For some time, their agency had been attempting to collect a deposit from a cash buyer of a residential property who claimed to be conducting the deal through a trust.
Any positive feelings quickly dissipated, however, once they opened the parcel. While the sales contract for the transaction was included, there was no form of currency. Instead, the buyer had tucked several postal stamps inside the package.
Alarm bells
Naturally, receiving such a bizarre item immediately set off alarm bells for Preston and Breitenbecker, especially since Brick City Title had repeatedly clarified to the buyer about which forms of payment the agency could accept. “If we feel or suspect anything unusual, we dig into available resources to resolve any possible fraudulent dealings,” said Preston, reflecting upon the incident. The next step for both professionals was to get on the horn to the buyer’s agent and reiterate which forms of payment were permissible – including a bank wire or a cashier’s check. A three-way call between the agent, Brick City Title and the buyer followed shortly after.
Any title agent who has been in Preston’s and Breitenbecker’s shoes will likely be able to predict what happened next. The buyer was incensed about being called out for the package and that Brick City Title was asking for more information about the trust involved in executing the transaction. After some back and forth, the buyer clammed up and ended the call. Preston, Breitenbecker and Brick City Title then took stock of what happened. A consensus quickly emerged that the whole transaction was highly suspect. The experience of other parties in the transaction further supported this view, with both the agent and seller having their own misgivings about the buyer’s behavior and demeanor.
The final step taken was to send the transaction materials to Alliant National and to subsequently cancel the transaction – much to the relief of all involved. “The seller wasn’t surprised this buyer was fraudulent,” said Preston when discussing the aftermath, “and was glad that we uncovered what we found and cancelled the transaction so that [they] could move on.”
Lessons learned
As with any fraudulent transaction, the experience of Brick City Title provides important takeaways. It showcases how agents must not only adhere to their companies’ policies and procedures but also follow their gut instincts. In this case, the buyer’s behavior alone was a clear red flag. “I had a couple of conversations with the buyer and the conversations were not pleasant,” Preston explained. “This person had a very demanding and insulting demeanor which put me on guard.” Brick City Title’s experience also highlights how successful anti-fraud efforts are bigger than the actions of a single party. Instead, having a strong working relationship with every transaction stakeholder is the key to safe and secure transactions.
Through interfacing with its partners in the transaction, Brick City Title gained additional information that backed up their original assessment. The transaction was indeed fraudulent, and the way it was prevented is an essential reminder of how stopping fraud requires all hands on-deck.
You’ve heard the rumors. Let’s dig into the facts businesses need to know.
You may have heard about the dark web before. Accessible exclusively through third-party tools, the dark web is mostly known for its association with unsavory activity. One study, for example, pegged almost 57% of all dark web content as being illegal. It is also estimated that over half of the 2.5 million daily dark web visitors have engaged in criminal behavior.[i]
Businesses can’t afford to ignore the risk represented by this hidden swatch of the internet. Let’s explore what you need to know about the dark web and steps you can take to prevent it from being weaponized against your agency.
The internet iceberg
But first, let’s flesh out the structure of the internet so we can better orient ourselves to what we’re talking about when we discuss the dark web.
Just for a moment, imagine the internet as an iceberg. Many people know that the visible portion of an iceberg represents only a tiny fraction of its full size. The same is true for the internet. That visible portion includes the sites indexed by search engines – that is, any site you can visit by typing its name into a website like Google. Below this level is what is known as the “deep web,” which should not be confused with the dark web.
While both internet levels are inaccessible through search engines, the deep web includes many sites that you and I use every day. Your email inbox, for example, is part of the deep web, as are pages detailing sensitive information like bank accounts and medical records. While the numbers vary, it is estimated that the deep web encompasses a stunning 90-95% of the internet and is 400 to 500 times larger than the surface-level internet.[ii]
Underneath all this hidden yet perfectly legitimate content is the dark web. Not only is the content not crawled by search engines like Bing, Google or Chrome, but to access it, you need to employ a specialized internet browser called “Tor.” Designed for total anonymity, Tor lets users access the internet’s most hidden and illicit content while shielding their identities and locations.
A hive of scum and villainy
In the classic 1977 space epic Star Wars, Obi Wan Kenobi’s and Luke Skywalker’s mission to defeat the Empire begins by going to the Mos Eisley spaceport to recruit the roguish smuggler Han Solo. Prior to entering the town, Kenobi cautions the young farm boy about the potential dangers they will face, referring to the location as a “wretched hive of scum and villainy.”
In many ways, the wise jedi’s words are an apt description of the dark web. While the computer network can have legitimate applications, it is teeming with illicit activity. Bad actors frequently use the communication network for all sorts of crimes, including:
Fake IDs
Credit card fraud
Selling business EIN numbers
Offering trade secrets to the highest bidder
Publishing hacker tools
Buying and selling prohibited items like drugs or weapons
Engaging in human trafficking
If that wasn’t enough, the dark web can be a minefield of cybersecurity risks including malware and other viruses.
Keep your business clear of the dark web
As with most cybersecurity threats, when it comes to the dark web, prevention is the best medicine. You can do a lot to keep your agency safe by deploying strong cybersecurity protocols and safeguards. Here are a few examples:
Enact multi-factor authentication.
Require your staff to adhere to best practices for creating and maintaining strong passwords.
Update your programs and ensure you have strong anti-virus software in place.
Instruct your staff to use a virtual network server or VPN whenever they are working remotely, which will prevent data interception by cybercriminals.
Final words Although most people will go their entire lives without having to worry about the dark web, it remains a significant threat to businesses, particularly in industries like ours that handle large amounts of personal data. Taking preventative measures now can decrease your risk profile and keep your firm’s sensitive information out of th
Today’s title professionals face ever-increasing cybersecurity threats, all of which can cause major disruption and economic loss. With October being Cybersecurity Awareness Month, now is the perfect time to review the latest trends affecting our industry and understand how to mitigate some of the top challenges.
I. Wire fraud remains number one
Wire fraud continues to be the number one threat to title agents, their customers and the vitality of their business. According to the latest FBI reports, the average cost per wire fraud incident is nearly $200K, and the total number of incidents recorded this year will likely break records.
Take the following actions to derail some of the most common schemes, including phishing, business email compromise and social engineering:
Use multi-factor authentication (MFA) for system access.
Ensure the latest security patches are promptly installed. Read our tips on keeping programs updated consistently.
Consider upgrading your antivirus protection with endpoint detection and response (EDR), a dynamic tool that leverages AI technology to reinforce your security.
II. Watch out for fraudulent sellers
Seller theft, one of the most significant emerging threats, involves a scheme where the seller’s identity is falsified, leading to a bogus and fraudulent sale. There is no shortage of information online regarding real estate transactions, making it easy for thieves to obtain these details. Here are some of the best strategies for combating these fraudsters:
Use encryption to protect communications and all identifying information, including emails and data that is “at rest,” that is, data housed physically on a given computer storage device.
Verify and validate identification through available electronic tools.
Confirm and reconfirm throughout every step of the transaction. Slow down. Take time to verify.
To reduce fraudulent transactions and lower premiums, Alliant National has initiated a crime watch program, which incentivizes policy-issuing agents to detect and prevent illicit activity. Learn more about the program and get involved.
III. Privacy remains the focus
Ten states have now enacted comprehensive privacy laws. Six have passed laws this year alone, with Texas being just the latest to do so. All 50 states now have data breach reporting laws. Many statutes impose a significant daily fine for late notice or a private right of action for failure to comply and negligence.
What all these legislative moves imply is that privacy and sensitive data protection remains at the forefront of our industry. Title leaders must ask themselves if they are staying current on the latest technologies and techniques to guarantee end-to-end data protection, including:
Developing a written security plan and devoting the necessary time and resources to ensure employees are trained sufficiently. maintaining complete records is important as well.
Encrypting sensitive and non-public information, which is essential to protect against unauthorized access and breaches.
Knowing and abiding by your state-specific breach reporting requirements.
IV. Practice secured electronic document storage
Title agencies routinely deal with electronic documents that contain large quantities of sensitive information and which represent a highly attractive target for today’s criminals. In fact, according to recent research, “88% of organizations worldwide were experiencing spear-phishing attempts in 2019. And 68% of business leaders felt their cybersecurity risks were drastically increasing.”[i]
Here are some principles to help keep these bad actors at bay:
Ensure you are applying encryption to protect digitally stored documents.
Perform periodic backup and recovery tests to ensure the availability and integrity of stored records.
Maintain and test disaster recovery and business continuity plans.
V. Adhere to all regulations
Regulatory compliance requirements have increased and will continue to evolve to address shifting cybersecurity and consumer privacy issues. Stay abreast of some of the most pressing changes to the landscape:
The current patchwork of complex state privacy and data breach laws is expected to continue growing without any expected federal legislation.
The Gramm-Leach-Bliley Act (GLBA) has been updated for the first time since the early-aughts to address data security and privacy. Modifications to the law’s security safeguard rules are going into effect in June 2023 and will be enforced by the Federal Trade Commission.
The National Association of Insurance Commissioners (NAIC) has released a draft of proposed 2023 privacy protection requirements modeled after the California Consumer Privacy Act (CCPA) and the New York State Department of Financial Services (NYDFS).
Taking action can keep you safe
Wire fraud. Seller falsification. Regulatory compliance. It seems like every day there is a new thing for the busy title agent to worry about. Staying apprised of the latest news and best practices, however, can help, as can seeking out the expertise of an experienced technology provider. Taking these steps, along with carrying comprehensive insurance for cybercrime and liability, can reinforce your security posture for maximum protection.
