The Florida Land Title Association recently reported an incident to its members where a title agent fell victim to a fraud scheme involving a Smartphone and a new app that allows a check to be deposited by using the Smartphone’s camera to take a picture of the front and back of the check.
A couple was issued a check for closing proceeds. They then left the agent’s office but returned several hours later and asked the agent to wire the proceeds instead. The agent took the check back, voided it (rather than stopping payment on it) and wired the proceeds to the couple’s account. The agent did not realize that the couple had already deposited the check using a Smartphone, causing a shortage in the trust account.
More and more banks, and even online payment sites like PayPal, offer downloadable applications for Smartphones that use the phone’s camera feature to take a picture of the front and back of a check and deposit it into the payee’s account. The real danger in this technology is there are no markings on the check indicating whether it has been processed because the image is only scanned and not run through a machine as it would have been had it been deposited at an ATM or with a bank teller.
The key to preventing such a scam is to protect your checks as if they were cash while they are in your office and also to refuse to exchange them for other forms of payment after they have left your office. Also, keep signed checks within your sight during the closing. Leaving signed checks on the closing table while you leave for a moment may allow a party to take a picture of the front and back of the check with a Smartphone and deposit it. Upon returning to the room, you might then be asked to wire the proceeds instead. This scam may not be caught until it is too late because the check will have been deposited without being removed from the closing room.
Please check with your title underwriter or the Florida Land Title Association for more information about fraud prevention related to closing transactions.
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