CHCP Wire Transfer & Fraud Prevention 3 — Questions and Answers
Question 1: A seller's proceeds check is mailed but never arrives. The seller claims fraud. Which document best helps the closing professional trace the funds?
- The title commitment
- The HUD-1 or Closing Disclosure showing disbursement details (Correct answer)
- The deed of trust
- The purchase and sale agreement
Correct answer: The HUD-1 or Closing Disclosure showing disbursement details
The Closing Disclosure or HUD-1 records all disbursements including check numbers, amounts, and payees, making it the primary document to trace where proceeds were directed.
Question 2: Which federal law requires financial institutions, including some title companies, to file Suspicious Activity Reports (SARs)?
- RESPA
- The Bank Secrecy Act (BSA) (Correct answer)
- TILA
- FIRPTA
Correct answer: The Bank Secrecy Act (BSA)
The Bank Secrecy Act mandates that covered financial institutions file SARs with FinCEN when they detect suspicious transactions that may indicate money laundering or fraud.
Question 3: What is 'vishing' in the context of real estate wire fraud?
- Fraudulent wire instructions embedded in a PDF
- Voice phishing — using phone calls to manipulate victims into revealing information or sending funds (Correct answer)
- A visual spoofing technique that mimics a company's website
- A variant of check kiting using virtual accounts
Correct answer: Voice phishing — using phone calls to manipulate victims into revealing information or sending funds
Vishing uses phone calls where fraudsters impersonate settlement agents, lenders, or banks to convince parties to wire funds or disclose sensitive account information.
Question 4: When a wire transfer is received into an escrow account, what should the closing professional verify before disbursing funds?
- That the wire amount matches the Closing Disclosure and the funds have fully cleared (Correct answer)
- That the buyer has signed the loan documents
- That the title commitment has been issued
- That the deed has been recorded
Correct answer: That the wire amount matches the Closing Disclosure and the funds have fully cleared
Funds must be verified as received, cleared, and matching the expected amount on the Closing Disclosure before any disbursement to prevent shortfalls from returned wires.
Question 5: Which scenario best illustrates 'seller impersonation fraud' in a real estate closing?
- A buyer submits false income documents to qualify for a mortgage
- A fraudster poses as the property owner and instructs the closing agent to send sale proceeds to a new bank account (Correct answer)
- A lender misrepresents loan terms to the borrower
- A title agent inflates closing fees without disclosure
Correct answer: A fraudster poses as the property owner and instructs the closing agent to send sale proceeds to a new bank account
Seller impersonation fraud occurs when criminals assume the identity of a legitimate property owner to redirect sale proceeds, often targeting vacant land or properties with no mortgage.
Question 6: A closing professional should treat a wire instruction sent from a lookalike domain (e.g., 'titleco-llc.com' instead of 'titlecollc.com') as which type of threat?
- Low risk — minor spelling differences are common
- Domain spoofing — a hallmark of BEC fraud requiring immediate verification (Correct answer)
- An IT configuration error by the sender
- A legitimate alternate company domain
Correct answer: Domain spoofing — a hallmark of BEC fraud requiring immediate verification
Lookalike domains are a core BEC tactic; even a single character difference signals a spoofed identity and requires out-of-band verification before any action.
Question 7: What is the primary purpose of a 'call-back verification' procedure for wire transfers?
- To confirm the buyer's identity for TRID compliance
- To independently verify wire instructions using a previously established phone number before funds are sent (Correct answer)
- To satisfy the lender's funding conditions
- To notify the real estate agent that closing is complete
Correct answer: To independently verify wire instructions using a previously established phone number before funds are sent
Call-back verification requires calling a contact at a pre-verified number to confirm wire details, preventing fraud by ensuring criminals cannot intercept instructions via email.
CHCP Wire Transfer & Fraud Prevention 3
A seller's proceeds check is mailed but never arrives.
The seller claims fraud.
Which document best helps the closing professional trace the funds?