04/11/2024

Breaking Down the FinCEN Anti-Money Laundering Rule: What Is Considered Residential Property?

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking that would require certain people involved in real estate closings and settlements to report information to the agency about all-cash residential transactions nationwide involving legal entities and trusts. You can read a summary of the proposed rule's requirements here.

ALTA analyzes various parts of the proposal to help title and settlement professionals understand the impact it will have on their operation.

Here’s a look at what FinCEN considers residential property. Since FinCEN’s proposed real estate rule only requires reporting for residential transactions and not commercial, it’s important to understand the distinction which may be different than the way you think about it in your business landscape.

For the sake of this rule, FinCEN defines “residential property” in three ways: 

  1. real property designed for one- to four-family occupancy
  2. vacant or unimproved land zoned (or permitted) for construction for 1-4 family occupancy
  3. shares in a cooperative housing corporation

To determine if one of these three factors apply to a property, consider the following questions:

  • Can I infer that a property is residential from its purchase contract?
  • If the property is vacant land, is it zoned as residential or commercial?
    • Hint: This can be obtained from the county or city’s zoning office
  • Does the property’s tax assessor data indicate a “building type?”
  • Does the building appear to be designed for a family of four or less?

It's important to note, however, that just because a property meets one of these above indicators, does not necessarily mean it needs to be reported to FinCEN. If the property meets one of these indicators AND is purchased via an all-cash transaction, then it must be reported to FinCEN.

Additional Articles

04/09/2024

FBI Reports Cybercrime Losses Hit $12.5B, Record Number of Complaints Filed in 2023

FBI crime type losses
Source: FBI Internet Crime Report

Cybercrime losses rose to $12.5 billion and and reported incidents reached all-time highs last year, according to the 2023 FBI Internet Crime Report.

The FBI reported it received a record 880,418 complaints with potential losses exceeding $12.5 billion in 2023.

This is nearly a 10% increase in complaints received, and represents a 22% increase in losses suffered, compared to 2022. The FBI said that incidents continue to be underreported.

“The cyber landscape is threatened by a multitude of malicious actors who have the tools to conduct large-scale fraud schemes, hold our money and data for ransom, and endanger our national security,” said Timothy Langan, executive assistant director for the FBI. “Profit-driven cybercriminals and nation-state adversaries alike have the capability to paralyze entire school systems, police departments, healthcare facilities, and individual private sector entities. The FBI continues to combat this evolving cyber threat. Our strategy focuses on building strong partnerships with the private sector, removing threats from U.S. networks, pulling back the cloak of anonymity many of these actors hide behind and hitting cybercriminals where it hurts: their wallets, including their virtual wallets.”

In one incident involving a real estate transaction last year in Stamford, Conn., an individual was in the process of purchasing a home. The victim received a spoofed email from their supposed attorney instructing them to wire $426,000 to a financial institution to finalize the closing. Two days after the wire was initiated, it was realized the instructions came from a spoofed email. Upon notification, the IC3 Recovery Asset Team (RAT) immediately initiated the Financial Fraud Kill Chain (FFKC) process to freeze the fraudulent recipient financial bank account. Collaboration with the domestic recipient financial institution and the local police department confirmed $425,000 was frozen and returned to the individual, which enabled them to complete the real estate transaction.

In 2023, the FBI initiated the FFKC on 3,008 incidents with potential losses of $758 million.

FBI Guidance for Sending Wire Transfers
  • Contact the originating financial institution as soon as fraud is recognized to request a recall or reversal and a Hold Harmless Letter or Letter of Indemnity.
  • File a detailed complaint with gov. It is vital the complaint contain all required data in provided fields, including banking information.
  • Never make any payment changes without verifying the change with the intended recipient; verify email addresses are accurate when checking email on a cell phone or other mobile device.

Last year, ALTA released an update to its Best Practices, which included a recommendation to use a wire verification service when sending money.

Report Incidents to IC3

Reporting incidents to the FBI’s Internet Crime Complaint Center (IC3) is important to helping law enforcement fight cybercrime. Click here to report a complaint.

ALTA Resources

04/04/2024

Fresh Phish: U.S. Post Office Text Phishing Message

040424 Fresh Phish

Alert: Spoofed Email Appears to Come from ALTA President

Screenshot 2024-04-04 141227ALTA is alerting its members of phishing emails with "ALTA" and the company name in the subject line.

Like title and settlement companies, email from ALTA leadership and staff can be spoofed. In the latest scheme, a phishing email appears to come from ALTA President Don Kennedy telling recipients that ALTA's regulatory department has made multiple attempts to contact them to deliver a notice that requires attention. Note the fraudulent email address in the image. This is a phishing email. ALTA’s system was not breached. Your information is safe.

Do not open the attachment, respond or click any links in the email. In addition, you should contact your IT department and block the domain of the email or the IP address that it is coming from. Once the scammers catch on, they will likely switch email domains.

It's recommended to take extra precaution when reviewing email on smart phones as it can be difficult to see the actual email address behind the sender's name.

ALTA will never contact you and ask for login/passwords, credentials, credit card information, or payments by phone or via email. If an ALTA member is ever concerned about whether a person contacting them by phone or email for any reason is employed by ALTA, they should end the communication or conversation and call ALTA at 800-787-2582 or email [email protected] for confirmation.

Tips to Protect Yourself

ALTA understands that phishing attempts can be very clever, but we encourage everyone to slow down. It’s always a good idea to:

  1. Carefully review all email headers to be sure that messages are coming from people or companies who are known to them; when in doubt, forward the message to the intended recipient to be sure that a reply does not end up in the wrong hands.
  2. Hover over any links in a message and see where a click will go – even links which appear to be a complete URL spelled out. Anything could be lurking beneath the that link.
What if You Fell for the Scam?
  1. Call your credit card company using the phone number on the actual card or on the card-issuer’s website.
    • Report fraud and review recent charges with a card-issuer representative.
    • Have the credit card canceled/replaced.
    • Consider freezing your credit if you provided additional non-public personal information while making the payment.
  2. Report the incident to your IT department.
    • Consider a scan of your computer for viruses or vulnerabilities if you used the computer to reply to the email or clicked on the URL in the body of the message.
    • Consider changing your login/password information, especially if it’s stored for ease of use.

04/02/2024

ALTA SPRINGBOARD: Getting Started With an Artificial Intelligence Strategy           

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ALTA President Don Kennedy and Argun Kilic, CEO and co-founder of Areal.ai, during a panel discussion at ALTA SPRINGBOARD on artificial intelligence.

By Megan Hernandez

Seeing a new technology like artificial intelligence (AI) catch fire often is exciting and intimidating. ALTA President Don Kennedy sat down with ALTA members Argun Kilic, CEO and co-founder of Areal.ai; Hoyt Mann, president and co-founder of Alanna.ai; and Matthew Younkle, CEO and co-founder of Pythonic Corp., during the 2024 ALTA SPRINGBOARD to discuss the benefits and challenges of incorporating an AI technology into a title insurance operation.

AI is an umbrella term that in its simplest form refers to the science of making machines that are focused on mimicking human tasks. Branches of AI include machine learning, which allows a system to learn from experience rather than being explicitly programmed to do a task; deep learning, a more complex type of AI involving neural networks that allows computers to observe, learn and react; and natural language processing, which is used to understand and process human language, such as in speech recognition and text analysis applications.

But knowing what AI is and knowing how to utilize it are two different things. Start small, Mann suggests. “We probably each could think of a few daily tasks that don’t use a lot of brain power that AI could take on for us,” he said.

“Pick a few small tasks and use AI to solve them,” Younkle said. “If you had an army of interns at your agency, what would you have them do?”

Running a business is time consuming, but you can get started by tasking AI with managing your calendar, building an email list or transcribing meeting notes, giving you more time to focus on your customers—or your next big idea.

Once you are aware of the tasks you’d like to hand off, you can begin to look for appropriate AI vendors. Finding the right vendor that fits your business can be a project in itself. “Look for success stories,” Kilic said. “Has the vendor done this before? Do they have references? What does success look like? Make sure your vendor can answer that question.”   

Security is another issue you need to be aware of when interviewing vendors. “Ask for a copy of their information security policy and proof of insurance,” Younkle said. “Get written confirmation that they’re not sending your data to a third party to train other AI models.”                                                                          

Of course, once you’ve selected a vendor, deployment challenges remain. Most of the time, the major obstacle is your internal team’s attitude about the technology. “I think it’s psychological,” Mann said. “There is a high amount of fear that there is something not human inserting itself between you and your customer.”

No AI application is perfect, and there are still plenty of bugs to work out. For example, ChatGPT is a popular generative AI application that is trained to follow a user’s instructions in a prompt and provide a detailed response. However, because ChatGPT has been directed to provide a response, “occasionally, it will hallucinate” if it can’t find the correct answer on the internet, Kennedy said.

“That’s a major problem that we see,” Kilic said. ChatGPT “will force itself to give you an answer” and confidently provide incorrect information.

Mann said there’s no need to be afraid that AI will take your job. “AI is not perfect, nor will it be. AI is not going to be (human) and never will be,” he added.

“A lot of those good conversations you’re having with customers are already becoming fewer and fewer because your workload is so great,” Mann continued. Humans “are under pressure to be more productive: We’re trying to answer more email, more phone calls, and a lot of time that’s after hours. To have AI take on some of those tasks—some of that pressure—is something we all need to get our heads around. I don’t want our industry to be the one with its head stuck in the sand because we’re afraid.”

04/01/2024

ALTA Policy Forms Update

The ALTA Board of Governors on Feb. 9 approved a recommendation to adopt revisions to the 2021 ALTA Forms Collection, as well as the approval of two new Collateral Assignment endorsements. The forms went into effect April 2 after going through a comment period.

2021 ALTA Forms Collection: Revisions to Forms and Endorsements
  • Short Form ECRLP Policies (Assessment Priority and Current Assessments versions): The revision will resolve problems with incorporating a state statute as an exception, by reference to Schedule B in the updated versions. The revised version enables incorporation of the appropriate state statutes directly by incorporating Endorsement 8.1 (Environmental Protection Lien).  A redline of the change is as follows:

Policy forms 1

  • Endorsement 3.3 (Zoning – Completed Improvement – Non-Conforming Use): This revision is designed to address coverage for a permitted non-conforming improvement, coverage for specified zoning classification, and to allow for the checkbox selection of the specific zoning matters that will be covered if removal or alteration results, rather than automatic inclusion of a blanket list of covered zoning matters.
  • Endorsement 42 (Commercial Lender Group): The revision is needed for alignment with the 2021 Forms Collection.  It replaces what is now an incorrect reference to a base policy provision in the 2021 collection with the new defined term “Obligor.” A redline of the change is as follows:
Policy forms 22021 New ALTA Endorsements
  • Endorsement 10.2 (Collateral Assignment) and Endorsement 10.3 (Collateral Assignment and Date Down): The new Endorsements 10.2 and 10.3 are designed to address collateral assignments of an insured mortgage.

These forms may be downloaded at alta.org/policy-forms in the section titled “For Public Comment | Recently Adopted Forms – Not Published” and comments may be submitted to [email protected].

As always, the forms have been developed by the ALTA Forms Committee and approved by the ALTA Board. An opportunity to review and comment is extended to ALTA Members, Policy Forms Licensees, and industry customers before final publication.

Technical Corrections

The following technical corrections to the ALTA Forms Collection have been released following a review from the ALTA Forms Committee review. The corrections are projected to be effective April 2.

  • Endorsement 14.0, 14.1, 14.2, 14.3: Opinions from industry expressed that the ALTA 2021 14-series endorsements with the current wording in their definition of “Advances” could be interpreted to limit interest to only amounts expended to prevent deterioration of the property. The Forms Committee decided to clarify the language by replacing two semi-colons with commas to clarify that the application of the interest is not limited to the single item, but to all advances. A redline of the change is as follows:

Policy forms 3The pending technical corrections to the ALTA 14-series endorsements are available at alta.org/policy-forms in the “Technical Corrections – Effective April 2, 2024” section, along with a single redline document reflecting the change being made to the four endorsements.

Purpose and Use of ALTA Forms Collection

The forms, in general, are made available for customer convenience. The parties are free in each case to agree to different terms and the use of these forms is voluntary unless required by law. The forms are copyrighted, and use is restricted to ALTA Policy Forms Licensees (including ALTA members) in good standing as of the date of use. Permission to reprint may be requested by contacting [email protected]

Questions or Comments?

If you have comments or concerns, contact Steve Gold at [email protected].

03/26/2024

ALTA SPRINGBOARD: Identifying Fraud Trends

Wire fraud
ALTA Board Governor Craig Haskins, CEO and President of Knight Barry Title Inc.; ALTA Member Tyler Newlon, Executive Vice President of Pioneer Title Agency Inc.; and ALTA Member Jeff Richardson, CIO of Shaddock National Holdings

Real estate wire fraud and seller impersonation fraud were on the top of the hit list during an Idea Festival at the 2024 ALTA SPRINGBOARD in Oklahoma City, Okla. ALTA Board Governor Craig Haskins, CEO and president of Knight Barry Title Inc.; Tyler Newlon, executive vice president of Pioneer Title Agency Inc.; and Jeff Richardson, CIO of Shaddock National Holdings, helped attendees understand what their businesses are up against during a panel on industry fraud trends.

“Fraudsters have gotten pretty impressive and brave,” Newlon said. “(My title insurance company) has seen every party in a real estate transaction participate in a seller impersonation fraud case from the notary on down.”

The best way to prevent real estate-related fraud is to get involved at the beginning of every transaction and communicate with all parties in the transaction, he noted. “Make sure you start early and communicate,” Newlon said.

03/21/2024

ALTA Good Deeds Foundation Awards $132K in Grants

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The ALTA Good Deeds Foundation awarded a $6,000 grant to Neighborhood Housing Services Oklahoma Inc., a nonprofit that helps would-be homebuyers access affordable housing, in Oklahoma City, Okla.

The ALTA Good Deeds Foundation announced the recipients of the latest round of grants totaling $132,000.

“Having raised more than $1.3 million and awarded a total of $976,000 in grants to small, local organizations in 43 states and the District of Columbia, the Foundation has done incredibly meaningful work for communities across the United States since 2020,” said Foundation Board Chair Mary O’Donnell, president and CEO of Westcor Land Title Insurance Co. and past president of ALTA. “By providing grants to community nonprofits, title insurance professionals and the ALTA Good Deeds Foundation are able to make a huge impact.”

Twenty-one $6,000 grants were awarded to charities supported by ALTA members. The grants were awarded to:

  • Ace the Stigma, Charlotte, N.C.
  • Convergence Ohio, Columbus, Ohio
  • ANT’s Army, Charlestown, Md.
  • Bloomin’ Boutique, Oregon City, Ore.
  • City Mission of Findlay, Findlay, Ohio
  • Cooper Cares Inc., Philadelphia
  • Donnelly Food Pantry, Donnelly, Idaho
  • Emerge Food for Autism, Baton Rouge, La.
  • For Pete’s Sake Cancer Respite Foundation, Plymouth Meeting, Pa.
  • Forget Me Not Families, Newark, Del.
  • Hand2Hand, Jenison, Mich.
  • Maria’s Closet, San Pedro, Calif.
  • NeighborWorks Southern New Hampshire, Manchester, N.H.
  • Realtor Community Housing Foundation, Lexington, Ky.
  • Ronald McDonald House Charities of Oregon & SW Washington, Bend, Ore.
  • The Harford County 4-H Camp and Deer Creek Overlock, Street, Md.
  • The Landing, Houston
  • The People Center, Spring Lake, Mich.
  • Two Sparrows Village Inc., Fayetteville, Ga.
  • Uvalde CISD Moving Forward Foundation, Uvalde, Texas
  • Westbury Open for Rett Research, Elkhorn, Neb.

The Foundation also awarded a $6,000 grant to Neighborhood Housing Services Oklahoma Inc., a nonprofit that helps would-be homebuyers access affordable housing, in Oklahoma City, Okla., the host city of this year’s ALTA SPRINGBOARD. To see an example of the types of charitable organizations that receive grants from the ALTA Good Deeds Foundation, click here.

“It is incredibly gratifying to be able to enhance the great work of our members by supporting the nonprofits they are currently working with, especially organizations that support affordable housing—including Convergence Ohio, NeighborWorks Southern New Hampshire and many more--and help more people achieve the American Dream of owning a home,” said ALTA CEO Diane Tomb. “I am so proud to be a member of the title insurance industry, which encourages and champions this meaningful work our members do in their communities.”

The ALTA Good Deeds Foundation was launched in 2020 to bolster the charitable efforts of ALTA members. Title insurance professionals can apply for grants on behalf of recognized 501(c)(3) organizations that they support financially or through volunteer efforts; preference is given to housing-related charities. To give to the Foundation, visit altagooddeeds.org/donate or text GOODDEEDS to 44321.

ALTA SPRINGBOARD: Bulletproof Strategies for Leading Fearlessly

Poumpouras
Evy Poumpouras, a former Secret Service Special Agent, speaks at the 2024 ALTA SPRINGBOARD. Photo credit: Shawn Sullivan

By Megan Hernandez

Leadership doesn’t automatically belong to the person with the most seniority or the one with the best networking skills—leadership is something that comes from within.

Evy Poumpouras, a former Secret Service Special Agent and interrogator, shared her insights on leadership during the FNF Family of Companies-sponsored Idea Festival at the 2024 ALTA SPRINGBOARD in Oklahoma City, Okla. She noted that leadership is about building genuine connections with others.

From her 12 years protecting the world’s most high-value assets, including U.S. Presidents and First Ladies, as well as interviewing terrorists, Poumpouras took away hard-won lessons on how to shape a resilient mindset, communicate with maximum impact and create authentic relationships—yes, even with the bad guys.

Good leaders know how to be strong listeners, Poumpouras said. She described watching former President Bill Clinton interact with everyone from heads of state to the public and called on an ALTA SPRINGBOARD attendee to help her demonstrate. As she bent down to look her volunteer in the eyes, she used Clinton’s Arkansas draw: “Hello there, and what is your name,” she asked. “Justin,” the volunteer said. “Justin, it’s so good to see you. And where are you from, Justin?,” Poumpouras asked. She continued the conversation, using the attendee’s name approximately five times in less than a minute. Additionally, Poumpouras didn’t talk about herself during the conversation, she simply asked questions and listened.

“Take people in,” she said. “Open your eyes, and listen. Be there” without distractions.

The one thing she never saw a U.S. President do? Hold their cell phone—on or off—while they spoke to someone. “Put your phone AWAY,” she emphasized. “Phones kill trust. Just the fact that your phone is out—even if it’s face down—decreases your attention by 30 percent.”

The two characteristics people appreciate in a leader are warmth—being open, welcoming, approachable and non-judgmental—and competence. 

Good leaders understand the “rules of engagement,” Poumpouras said. Don’t cut people off or finish their sentences. Be mindful of when and how you correct others.

“The whole point is to make people feel connected,” she said. “You have to build rapport.”

Finally, good leaders also know how to accept and adapt both to other people and situations. “People have difficulty accepting the reality of a situation,” she said. But until you can accept the obstacle or the person you’re speaking with, you won’t be able to adapt to it.

“Accept the truth of what truly is,” Poumpouras said. “Accept both the person and the problem—that does not mean agreement.”

You can accept a person or situation without agreeing with them, she noted. She gave an example about questioning a terrorist. Of course, she didn’t agree or condone with what the terrorist was accused of doing, but she had to accept who he was and how he thought to build trust so he would answer her questions honestly.

Her point was that no matter the situation, whether in your personal or professional life, you must be able to accept what’s happening in the now before you can have any influence over it.

“Being adaptable is power,” Poumpouras said. Attempting to make others adapt to you is not leadership, “but when you can adapt to a situation, that gives you the power.”

03/14/2024

Breaking Down the FinCEN Anti-Money Laundering Rule: Who is in Charge of Reporting?

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking that would require certain people involved in real estate closings and settlements to report information to the agency about all-cash residential transactions nationwide involving legal entities and trusts. You can read a summary of the proposed rule's requirements here.

ALTA analyzes various parts of the proposal to help title and settlement professionals understand the impact it will have on their operation.

Here’s a look at who must report the information to FinCEN:

In general, the settlement agent—whether an attorney, escrow agent or title agent—will have responsibility for reporting a transaction under the rule. However, what happens if there is no traditional settlement agent? In that case, FinCEN’s rule provides a waterfall (FinCEN refers to this as a waterfall and a cascade) of who can and should report information from a transaction.

The Reporting Waterfall

According to the rule, a real estate professional would be a reporting person required to file a report and keep records for a given transfer if the person performs a function described in the waterfall and no other person performs a function described higher in the waterfall.

For example, if no person is involved in the transfer as described in the first tier of potential reporting

persons, the reporting obligation would fall to the person involved in the transfer as described in

the second tier of potential reporting persons, if any, and so on. For any reportable transfer, a potential reporting person would need to determine whether there is another potential reporting person involved in the transfer who sits higher in the cascade.

  • First choice: The person who is listed as the settlement agent on a settlement statement
  • Second choice: The person that prepares the settlement statement
  • Third choice: The person that files the deed for recordation
  • Fourth choice: The person that issues the owner's title insurance policy
  • Fifth choice: The person that dispenses the greatest amount of funds
  • Sixth choice: The person that did a title examination
  • Final choice: The person that prepares the deed

FinCEN also notes that companies or individuals within the waterfall can collectively agree to designate others in the waterfall to be the reporting person. How these agreements will work and whether other parties will be willing to take on this role is a major unknown.

Relevant part of the rule: (section c (1)) and (section c (3))