6 ms·

This was incredibly apparent to me when I recently bought a house. The seller was foreign, and had picked and escrow company that hadn't been in business for l

This was incredibly apparent to me when I recently bought a house. The seller was foreign, and had picked and escrow company that hadn't been in business for long. I was originally worried it was a scam and someone was trying to run off with my money, but that wasn't the gig. The two owners of the escrow company had owned multiple other escrow companies that were shut down. No complaints against them, so it's not like they were taking people's money and running. The escrow 'company' didn't have any sort of need for a paper trail of where money came from when buying my house. I imagine if I had shown up with a suitcase full of cash speckled with blood and coke they wouldn't have cared. There's likely no record of where all the money came from for me, (tech money) nor any of the other foreign buyers they regularly service. They're likely shut down again and opened with a new name.

OldHand2018 5y ago
FYI, the seller didn't choose the escrow company. Either your agent/attorney or the seller's agent/attorney did. And you had the legal right to choose the company providing almost all of those services. Well, in most states you do. Federal law provides that you can choose a subset of them.
- irrational 5y ago
  We recently sold a home. We did choose the escrow company. Neither we, nor the buyers, used an agent/attorney. We did the same thing when buying our new house. No agents or attorneys involved and the sellers chose the escrow company. These days, with the Internet, it really is tremendously easy to fill out all the paperwork correctly and do everything yourself. The total time we spent from beginning to end was a few hours total, which saved tens of thousands of dollars on each transaction. 10/10 I’d forgo using an agent/attorney next time as well.
  - topkai22 5y ago
    Not only that, you absolutely should shop the optional services (like title, escrow, etc.) We saved thousands in fees because me and my agent made a couple of phone calls to get competing bids after the seller (really the sellers agent) tried to direct us to a very expensive set of options.
  - OldHand2018 5y ago
    I would guess that in both cases, the buyer could have stepped in and said "no, use XYZ escrow service". The general idea is that the person that pays the fee at closing is the person that gets to choose the service provider. I could say more about the various "incentives" that some of the service providers offer to be the "default", but, well, I don't want to do that ;)
    - conductr 5y ago
      Nope. As a seller, that’s a big nope. If you want my property, I choose the title company. End of story.
      - OldHand2018 5y ago
        Go for it. But unless you pay (or it is a cash-only deal), it's a violation of federal law and the buyer can come after you later on for 3x the cost. End of story. https://www.law.cornell.edu/uscode/text/12/2608 https://www.law.cornell.edu/uscode/text/12/2608
        conductr 5y ago
        Oh wow, I've only ever sold to cash buyers & come to think of it my preferred title company wasn't even a point of negotiation. I suppose it does protect the buyer more, I just like working with a competent and fast title company
nullc 5y ago
It's not anyone elses business where the money came from! If you were engaged in crime then the investigations of the actual crimes can eventually catch up with you. Expecting crime to get caught by surveilling your finances when you have no reason to be suspected of a crime is like expecting to scan your private correspondence for evidence of a crime.
- kube-system 5y ago
  That's a fair opinion, but the law conflicts with that opinion in many places: https://en.wikipedia.org/wiki/Know_your_customer#Laws_by_country https://en.wikipedia.org/wiki/Know_your_customer#Laws_by_cou...
  - beervirus 5y ago
    KYC doesn’t mean you have to interrogate your customer about how they earned their money.
    - miohtama 5y ago
      You are correct. What you describe is called proof of source of funds and also should be required for high value transactions.
    - kube-system 5y ago
      It depends on the jurisdiction and the particular transaction. In the US, for instance: > financial institutions covered by the final rule must take reasonable steps to: [...] (3) determine the source(s) of funds deposited into the private banking account and the purpose and expected use of the account; https://www.fincen.gov/fact-sheet-section-312-usa-patriot-act-final-regulation-and-notice-proposed-rulemaking https://www.fincen.gov/fact-sheet-section-312-usa-patriot-ac...
      - nullc 5y ago
        > financial institutions covered being key...
beervirus 5y ago
>The escrow 'company' didn't have any sort of need for a paper trail of where money came from when buying my house. Why in the world would they? I’ve bought and sold lots of properties, and that has happened literally zero times ever. If the escrow company asked me where my money came from, I’d tell them to get fucked and I’d use a different company. It’s absolutely none of their business.
- VirusNewbie 5y ago
  That's not my point. My point is there is now no record of where the money came from, anywhere. If I go deposit 500k in a TDAmeritrade account or at Wells Fargo, you can bet it's going to be sent out to the IRS or have a flag flipped somewhere and that transaction is going to be recorded.
  - beervirus 5y ago
    Why would TDA report a deposit to the IRS? If it’s cash over 10k sure, but otherwise…
    - justin66 5y ago
      They're required to investigate and possibly file a suspicious activity report if they thought a transaction or a series of transactions was (wait for it...) suspicious. They might simply believe "there is no way this guy has $500k." This kind of report doesn't necessarily result in any kind of action that the client will notice, even if the investigators decide to pass it on to the government. This is all governed by laws like the Bank Secrecy Act. There's been a push in recent years to make it personal with bank personnel, who are reminded that they're subject to civil and criminal penalties if they look the other way and knowingly let the wrong kind of transaction through.
      - beervirus 5y ago
        So if I make a large deposit they probably won’t worry about it, but if a black guy does, maybe that’s a different story? Great.
slownews45 5y ago
I think folks get a bit confused here. The escrow company generally should do proper KYC work, and does fall under AML/CFT directives. But the where did your money come from (that some folks are used to) comes from LENDER requirements. Lenders underwrite based on a set of facts, ideally backed up by what actually happens in escrow. So if the escrow company get's a wire from a hard money lender instead of from your bank (same $100K) that's going to be a big difference in lender eval prior to funding (they don't want you borrowing your money from another lender - usually a sign you faked your ability to save, increased DTI etc).
- VirusNewbie 5y ago
  >The escrow company generally should do proper KYC work, and does fall under AML/CFT directives. I'm claiming that some of the escrow companies are only in business for a short period of time, only to pop up under a different name with one or two of the owners being different. Wouldn't that mitigate a lot of the risk of non compliance?
raxxorrax 5y ago
To be fair, there doesn't have to be a trail in my opinion. I think most financial crimes today are executed with eyes on everything. Of course there is money laundering, but the ideas circulating Europe about restricting cash are idiotic policies for activities sake.

OldHand2018 5y ago

FYI, the seller didn't choose the escrow company. Either your agent/attorney or the seller's agent/attorney did. And you had the legal right to choose the company providing almost all of those services. Well, in most states you do. Federal law provides that you can choose a subset of them.

irrational 5y ago
We recently sold a home. We did choose the escrow company. Neither we, nor the buyers, used an agent/attorney. We did the same thing when buying our new house. No agents or attorneys involved and the sellers chose the escrow company. These days, with the Internet, it really is tremendously easy to fill out all the paperwork correctly and do everything yourself. The total time we spent from beginning to end was a few hours total, which saved tens of thousands of dollars on each transaction. 10/10 I’d forgo using an agent/attorney next time as well.
- topkai22 5y ago
  Not only that, you absolutely should shop the optional services (like title, escrow, etc.) We saved thousands in fees because me and my agent made a couple of phone calls to get competing bids after the seller (really the sellers agent) tried to direct us to a very expensive set of options.
- OldHand2018 5y ago
  I would guess that in both cases, the buyer could have stepped in and said "no, use XYZ escrow service". The general idea is that the person that pays the fee at closing is the person that gets to choose the service provider. I could say more about the various "incentives" that some of the service providers offer to be the "default", but, well, I don't want to do that ;)
  - conductr 5y ago
    Nope. As a seller, that’s a big nope. If you want my property, I choose the title company. End of story.
    - OldHand2018 5y ago
      Go for it. But unless you pay (or it is a cash-only deal), it's a violation of federal law and the buyer can come after you later on for 3x the cost. End of story. https://www.law.cornell.edu/uscode/text/12/2608 https://www.law.cornell.edu/uscode/text/12/2608
      - conductr 5y ago
        Oh wow, I've only ever sold to cash buyers & come to think of it my preferred title company wasn't even a point of negotiation. I suppose it does protect the buyer more, I just like working with a competent and fast title company

nullc 5y ago

It's not anyone elses business where the money came from! If you were engaged in crime then the investigations of the actual crimes can eventually catch up with you. Expecting crime to get caught by surveilling your finances when you have no reason to be suspected of a crime is like expecting to scan your private correspondence for evidence of a crime.

kube-system 5y ago
That's a fair opinion, but the law conflicts with that opinion in many places: https://en.wikipedia.org/wiki/Know_your_customer#Laws_by_country https://en.wikipedia.org/wiki/Know_your_customer#Laws_by_cou...
- beervirus 5y ago
  KYC doesn’t mean you have to interrogate your customer about how they earned their money.
  - miohtama 5y ago
    You are correct. What you describe is called proof of source of funds and also should be required for high value transactions.
  - kube-system 5y ago
    It depends on the jurisdiction and the particular transaction. In the US, for instance: > financial institutions covered by the final rule must take reasonable steps to: [...] (3) determine the source(s) of funds deposited into the private banking account and the purpose and expected use of the account; https://www.fincen.gov/fact-sheet-section-312-usa-patriot-act-final-regulation-and-notice-proposed-rulemaking https://www.fincen.gov/fact-sheet-section-312-usa-patriot-ac...
    - nullc 5y ago
      > financial institutions covered being key...

beervirus 5y ago

>The escrow 'company' didn't have any sort of need for a paper trail of where money came from when buying my house. Why in the world would they? I’ve bought and sold lots of properties, and that has happened literally zero times ever. If the escrow company asked me where my money came from, I’d tell them to get fucked and I’d use a different company. It’s absolutely none of their business.

VirusNewbie 5y ago
That's not my point. My point is there is now no record of where the money came from, anywhere. If I go deposit 500k in a TDAmeritrade account or at Wells Fargo, you can bet it's going to be sent out to the IRS or have a flag flipped somewhere and that transaction is going to be recorded.
- beervirus 5y ago
  Why would TDA report a deposit to the IRS? If it’s cash over 10k sure, but otherwise…
  - justin66 5y ago
    They're required to investigate and possibly file a suspicious activity report if they thought a transaction or a series of transactions was (wait for it...) suspicious. They might simply believe "there is no way this guy has $500k." This kind of report doesn't necessarily result in any kind of action that the client will notice, even if the investigators decide to pass it on to the government. This is all governed by laws like the Bank Secrecy Act. There's been a push in recent years to make it personal with bank personnel, who are reminded that they're subject to civil and criminal penalties if they look the other way and knowingly let the wrong kind of transaction through.
    - beervirus 5y ago
      So if I make a large deposit they probably won’t worry about it, but if a black guy does, maybe that’s a different story? Great.

slownews45 5y ago

I think folks get a bit confused here. The escrow company generally should do proper KYC work, and does fall under AML/CFT directives. But the where did your money come from (that some folks are used to) comes from LENDER requirements. Lenders underwrite based on a set of facts, ideally backed up by what actually happens in escrow. So if the escrow company get's a wire from a hard money lender instead of from your bank (same $100K) that's going to be a big difference in lender eval prior to funding (they don't want you borrowing your money from another lender - usually a sign you faked your ability to save, increased DTI etc).

VirusNewbie 5y ago
>The escrow company generally should do proper KYC work, and does fall under AML/CFT directives. I'm claiming that some of the escrow companies are only in business for a short period of time, only to pop up under a different name with one or two of the owners being different. Wouldn't that mitigate a lot of the risk of non compliance?

raxxorrax 5y ago

To be fair, there doesn't have to be a trail in my opinion. I think most financial crimes today are executed with eyes on everything. Of course there is money laundering, but the ideas circulating Europe about restricting cash are idiotic policies for activities sake.