data security/best practices awareness and implementation · relanc.com...

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NCClosingAttorneyBestPractices.org

www.NCClosingAttorneyBestPractices.org

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Made Possible By a Grant From:

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Webinar Series:

“Attorneys Helping Attorneys!” • Series of Webinars • Next One => IT Security Compliance, NPI, E-mail Encryption • January 28, 2015 @ 2:00 PM

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Elizabeth Harrison, Esq.

Jonathan W. Biggs, Esq.

• Graduate of University of North Carolina (BA 1991) • Graduate of Campbell University School of Law (JD 1995) • Principal in the Firm of Elizabeth R. Harrison, Attorney at Law P.C.

(Raleigh, North Carolina) • Chair of the North Carolina Real Property Section of the NC Bar Assoc. • Chair of the North Carolina Attorney Best Practices Task Force • Member of Real Estate Lawyers of North Carolina (RELANC)

• Graduate of Duke University (AB 1987) • Wake Forest University School of Law (JD 1990) • Principal in Firm of Stubbs, Cole, Breedlove, Prentis & Biggs, PLLC (1990-2012) (Durham, North Carolina) • Vice President of Risk Management at Investors Title Insurance Company • Member of the ALTA Best Practice Task Force • Member of the ALTA Technology Committee • Member of the North Carolina Attorney Best Practices Task Force • Member of the North Carolina Real Property Section of the NC Bar Assoc. • Member of Real Estate Lawyers of North Carolina (RELANC)

Your Moderators:

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Richard “Dick” Reass

Your Guest Speaker:

Chief Executive Officer and Founder, Reliant Title and RynohLive He is a graduate of the University of Texas and his Navy career was bookended by combat in Vietnam and Desert Storm. Commands at sea included serving as Commodore of the 16 ship multinational force during Desert Storm. Dick's final assignment was as director of Management Information Systems in Washington, D.C. Richard M. (Dick) Reass is the president and founder of Reliant Title as well as Segin Software LLC. His passion for process improvement and innovative problem solving was the catalyst for developing RynohLive, once Reliant Title was well established. Dick describes himself as a re-engineered Naval Officer whose banker wife thought that starting a title agency would be a great way to keep him out of trouble once he had retired from the Navy. Little did she realize what would evolve! His vision of process improvement and systems integration led to the step-by-step development of RynohLive for escrow and trust account security and protection • ALTA Best Practices • ALTA Technology and Closing Committees

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Regulatory Requirements Lender Requirements ALTA Best Practices

• CYBER FRAUD

• Check Fraud / Wire Fraud / Mortgage Fraud

• Employee Embezzlement / Owner Escrow Theft

• CFPB (Dodd–Frank)

• CFPB Ruling 2012-03

• OCC Bulletin 2013-29

• NAIC Model Acts 230 & 628

• Lender 3rd Party Liability

• Legislative Changes

Today’s Environment

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ALTA Best Practices Framework Title Insurance and Settlement Company

1. Licensing 2. Escrow Standards 3. Security Standards: Physical, IT, NPPI

4. Settlement Procedures 5. Title Policy Delivery, Charges, Remittance 6. Insurance (E&O, Cyber, Fidelity, Surety) 7. Complaint Resolution

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Regulatory Requirements Lender Requirements ALTA Best Practices

Lenders Already Requiring Compliance

Today’s

Environment

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Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verification of reconciliation. These controls help meet client and legal requirements for safeguarding client funds.

Daily Reconciliation Requirement

Positive Pay

File Balance Documentation

Electronic Access for Underwriters

ALTA Best Practices Escrow Best Practices

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EVS compare items through electronic means to ensure the validity of the item/ document being submitted for review or analysis. Does the underlying data held by the bank and accounting system support the reconciliation results?

An electronic copy of a reconciliation statement is simply

another form of paper that cannot be analyzed for accuracy

ALTA Best Practices

Electronic Verification Systems (EVS)

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o #1 Defense Against Fraud o Match Bank Balances to Book

Balances o 3rd way: Individual Settlement Files

Each Settlement File = Sub Escrow Account Can’t take from Jones to pay for Smith

o Businesses Banking Regs

Different “Online Posting - 24 hour rule”

Transaction Notification

Daily Reconciliation Daily 3-Way Reconciliation

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Daily Reconciliation

o Summary Page Bank/Sweep Statement Outstanding Deposit List Outstanding Check Report Trial Balance

o Debits & Credits = Bank and Book o Red Flags Stale Dated Checks Undisbursed Funds Outstanding Deposits Negative File Balances

Be able to present a daily report

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Pre-Closing File Balance Check Endorsement Good Funds v. Collected Funds Deposit (In Transit = RESPA Violation) Dealing with IRS Liens Pacer Search – Patriot Search SSN Verification Identity Verification FIRPTA

Training & Records

Written Procedures

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Post Closing Pacer Search

Bring down Ledger Card-File Balance-HUD Check Payees Check Signing & Wiring Check Reissue Stop Payment

Training & Records

Written Procedures

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Settlement Software Controls

Permissions Freeze Files Logins Industry Standard Software

Training & Records

Written Procedures

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Unclaimed Property Stale Dated Check Follow-up Undisbursed funds Escrow Agreements Interpleading Funds Escheatment (5 year property)

Written Procedures

Training & Records

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oWhat are the 3-4 greatest risks from the outside?

o What are the greatest risks from insiders?

(Closers, Wi-Fi, computers, etc.)

o Verification and Validation Expect what you Inspect!

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Positive Pay

o Defense Against Check Fraud Banking Software that matches:

Check #

Check Date

Dollar amount

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relanc.com


Positive Pay

o Defense Against Check Fraud Banking Software that matches:

Check #

Check Date

Dollar amount

Payee

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Disburse Collected Funds

o Good Funds ≠ Collected Funds Good Funds – Settlement Definition Only Banking Regulation CC

Available Funds or Collected Funds Expedited Funds Availability Act 1987 Collected Funds Irrevocably Credited

Statute Definition v. Bank Definition NC Good Funds Settlement Act § 45A-3&4

Underwriter Guidelines

o Limit Good Funds Illinois and North Dakota $50,000 Indiana and Utah $10,000 Idaho $1,000

Settlement Funding Legislation Needed

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o Computer Technology Simplifies o Hard to Visually Identify o Beware of:

“First-time client” Asks for refund of “excess funds” Deal “Falls Through”- wire refund! Canadian Bank

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Follow the Money Follow-up after 3-4 days for:

Payoffs & Recordings

Follow-up after 10 days for: Government entities (taxes)

Service providers (hazard and flood).

Follow up after 30 days for: Disbursements greater than $1000.

Follow up after 45 days for all other disbursements.

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Escrow Security o Industry Software oAdministrative Controls

Ability to Limit Functions Freeze Files Written Procedures

oSegregation of Duties oDaily Reconciliation oStrong Passwords oDual Authentication

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Cyber Security

o Secure Email Service o Biometric Access Device o Strong Passwords

Master Passwords o Internet Controls o Firewalls o Browser’s o Training, Training, Training

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CYBER ALERT - A New Variant Zeus Botnet and Zero Access Rootkit

o Attack on Settlement Software No Administrative Controls Created Files Transferred Funds Posted Checks

o Daily Reconciliation Prevented Escrow Analysis Careful Review Potential Loss ~$2,000,000

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CYBER ALERT - A New Variant Zeus Botnet and Zero Access Rootkit

o NPPI Aspects >10,000 Settlement Files SSN’s Bank Account Numbers Investment Account Info Credit Card Numbers

o FTC Reporting Requirements?

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Online Banking Requirements

NACHA & FBI Guidelines Dedicated Stand Alone Computer Banking Only Use No Java – No Adobe – No Flash Malware Protection Automatic Updates Strong Authentication Dual Controls

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Control Web Access • Browser Selection

Avoid Internet Explorer (Personal Choice)

Speed - Security - Functionality

Active X for Closing Packages

Eliminate Advertising (Adblockplus.org)

Keep Plugins up to date o Java-Flash Player-Adobe Reader

• Firewalls & Routers • Lockdown Computer Internet Access

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Secure Email

o Encrypted Email

Protects NPPI Sarbanes-Oxley Requirement Lender Requirement “Best Practices”

o Easy Affordable First Step

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Who else is reading your email?

These pictures were taken in 1975, and kept in a folder in my attic for 38 years.

In April 2013, I scanned the pictures and emailed them to a friend in Florida

They were “on the web 5 days later”!

Latest Scam – “Revised wire instructions”

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Nothing to be Learned

There is nothing to be learned

from the second kick of the mule!

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Thank you for Participating. Any questions?

data security/best practices awareness and implementation · relanc.com...

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