As you may know, the Department’s Division of Consumer Services regulates a variety of non-depository institutions, from mortgage companies to money services businesses. A smaller group of licensees includes escrow. Escrow agents play an integral role in transactions involving real and personal property.
About the Scheme
In the fall of 2021, a licensed escrow agent, through its Designated Escrow Officer (DEO), wired $3.5 million to an unknown party in Turkey. Some of those funds presumably came from a refinance of the DEO’s own residential real estate and about $1.5 million came from the escrow agent’s IOLTA trust account. None of the funds transferred from the IOLTA trust account were pursuant to written escrow instructions authorized by clients.
Within a few weeks, closing disbursements by the escrow agent were not being made. The DEO initially explained to clients that the DEO’s bank account had been hacked and promised the disbursements would be made. The disbursements did not happen. The DEO then filed a complaint with the FBI’s Internet Crime Complaint Center (IC3). In the complaint, the DEO claimed under penalty of perjury:
- she was the victim of an extortion scheme;
- she transferred $3.5 million to Turkey to assist a friend in danger;
- she was in fear for her life.
The DEO informed some of the escrow agent’s clients that she had not been very truthful about having a problem with her bank and provided a copy of her complaint with the FBI. The Department became aware of consumers whose escrow funds were not distributed or were distributed with insufficient funds.
Department's Enforcement Action and Case Conclusion
The Department issued a Temporary Order to Cease and Desist and Take Affirmative Action (TCD). The Department also issued a formal enforcement action in the form of a Statement of Charges. To conclude the case, the Department issued a Final Order revoking the license of the escrow agent and DEO, permanently banning the DEO from the industry, ordering over $1.9 million in restitution to harmed consumers, and imposing a $10,000 fine and $10,000 in investigation costs. In addition, the DEO was criminally charged with four counts of Theft 1 (with major economic crime aggravator) and four counts of Money Laundering.
To learn more about this matter (C-21-3240) and other DFI enforcement actions, visit the Division of Consumer Services Enforcement Actions webpage.