Dear ATG Agent:


A new check fraud scam has appeared that could cause significant losses to unprepared title agents. This new scam involves the latest and greatest technology advance of using one's smart phone to deposit a check. Many banks today offer mobile-banking applications for smart phones that allow a user to make deposits by simply taking a picture of the check with his or her smart phone and forwarding the image to the bank for deposit.


In a recent fraud, a party to a closing returned to the title agent a few hours after the closing with his proceeds check in hand, asking the title agent to wire the proceeds instead. It was later discovered that the original check had already been deposited using smart phone technology. The title agent had no way of knowing this occurred and discovered the problem a few days later when the check actually cleared. The title agent is now short the money. The title agent did have Positive Pay protections in place, but it failed to uncover this fraud. They also likely assumed that the check had never been presented for payment since it was returned to the title agent unmarked so soon after the closing.

How to Prevent It


There are a few easy steps that could have prevented this from happening:

1. Issue a stop payment notice to your bank. This title agent did not do this because it was assumed that the Positive Pay protection would catch this.
2. Implement a procedure whereby you will accommodate a request to reissue a check by wire only after a period of time that can guarantee that the check had not already been deposited. A one-week period should suffice.

Since many Positive Pay protection systems could miss this, it is imperative that agents complete step one — issue a stop payment notice — immediately. Please remember that you have a very limited window to issue the stop payment notice. Checks deposited via a smart phone are usually recognized by the bank at the end of the day. If you issue the stop payment notice the next day, it may be too late. Therefore, agents should implement a waiting period before reissuing the check as a wire.


Contact me at rtrubiana@atgf.com or 312.752.1225 if you have any questions or concerns.


Sincerely,

Ronald J. Trubiana

Senior Vice President and Chief Financial Officer

Attorneys' Title Guaranty Fund, Inc.