The Security Title Guarantee Corporation of Baltimore Anti Fraud Plan Update

Transcription

1 The Security Title Guarantee Corporation of Baltimore Anti Fraud Plan 2013 Update

2 Introduction The Security Title Guarantee Corporation of Baltimore (Company) recognizes that an insurance company must take a proactive stance against fraud in today s business environment. This Anti Fraud Plan presents a set of procedures that the Company undertakes when there are allegations or evidence of possible Home Office fraud, fraud by Insurance Producers and fraud by claimants or insureds. The procedures outlined herein will be used as a guideline, and may be modified at management s discretion. The Company recognizes that each possible fraud situation is different and management responses can and will vary. The Company s Anti Fraud Plan is designed to serve the following purposes: To communicate to all stakeholders the policies and procedures in place that will help to deter application, underwriting and claims fraud as well as Home Office or Agent frauds, violations of laws and regulations or other improprieties. To identify the persons within the Company responsible for fraud prevention, detection and investigation. To detail the management procedures in place for preventing, detecting, investigating, monitoring and responding to potential fraudulent situations. To comply with the regulatory laws impacting the title insurance industry. To be a part of a corporate governance program. The effectiveness of this Anti Fraud Plan is measured by the following: Successful implementation of preventive and detective controls Monitoring of the effectiveness of these controls Meeting regulatory and compliance requirements Education and awareness training Auditing to review the adequacy and appropriateness of fraud controls The conditions of this program apply to irregularities, or suspected irregularities, involving not only employees of the Company but also Insurance Producers, those referring business to the Company or its Insurance Producers, and the Company s insureds or proposed insureds. Any investigative activity required will be conducted without regard to the suspected wrongdoer s length of service, position, title, or relationship with the Company. Page 2 of 20

3 This Anti Fraud Plan is presented in the following sections: Section I Section II Section III Section IV Section V Section VI Section VII Section VIII Section IX Responsibilities Employees 4 Compliance Officer 4 Anti Fraud Coordinator 4 Compliance Director 4 General Counsel 4 Fraud and Complaint Handling Procedures 5 Confidentiality 5 Training Education and Training of Employees 6 Education and Training of Insurance Producers 6 Courses of Instruction 6 Training of Consumers 7 Privacy Policy and Code of Conduct Privacy Policy Procedures 7 Physical Safeguards 7 Electronic Safeguards 7 Procedural Safeguards 8 Responsible Official 8 Code of Conduct 8 Audit 8 Disciplinary Action 9 Internal Fraud Detection, Investigation and Reporting Actions Constituting Internal Fraud 9 Guidelines and Procedures for Conducting Investigations of Internal Fraud 10 Termination due to Internal Fraud 12 Reporting of Internal Fraud 12 Claims and Application Fraud Detection, Investigation and Reporting Actions Constituting Claims and Application Fraud 12 Guidelines and Procedures for Conducting Investigations of Claims and Application Fraud 13 Reporting of Claims and Application Fraud 13 Insurance Producer Fraud Detection, Investigation and Reporting Prevention and Detection of Insurance Producer Fraud 14 Actions Constituting Insurance Producer Fraud 16 Guidelines and Procedures for Conducting Investigations of Insurance Producer Fraud 17 Investigators 17 Reporting of Insurance Producer Fraud 17 Anti Fraud Plan Evaluation Monitoring 18 Annual Review 18 Annual Reporting 19 Key Contacts Anti Fraud Coordinator 20 General Counsel 20 Compliance Officer 20 Compliance Director 20 Page 3 of 20

4 Section I Responsibilities Employees All officers and employees of the Company are responsible for preventing and detecting insurance fraud and other irregularities. The Company s senior management is responsible for ensuring the implementation of procedures that would reasonably deter such wrongful acts. All officers and employees of the Company are expected to be familiar with the types of improprieties that might occur within his/her area of responsibility and be alert for any indication of irregularities. Compliance Officer The Compliance Officer is responsible for compliance with the requirements of filing this Plan and any updates to the Plan with applicable regulatory bodies and for overseeing the handling and response to complaints filed by policyholders and regulators. All employees are responsible for prompt notification of policyholder and regulatory complaints to the Compliance Officer. The Compliance Officer will maintain a written record of each complaint and its disposition. The Compliance Officer is responsible for filing annual complaint logs in compliance with all regulatory requirements. Anti Fraud Coordinator The Anti Fraud Coordinator is responsible for overseeing the implementation of and auditing compliance with this Anti Fraud Plan as well as the prevention, detection and coordination of any investigation of suspected external frauds other than claims and underwriting frauds. All suspicions of external fraud, other than claims and underwriting frauds, must be reported to the Anti Fraud Coordinator or his/her designee so that documented and approved actions will be taken, including contacting law enforcement agencies when appropriate. Compliance Director The Compliance Director shall be the Chairman of the Audit Committee of the Board of Directors or a member of the Committee appointed by the Chairman. The Compliance Director is responsible for investigation of allegations of internal fraud and violations of the Company s Code of Conduct or Policy Regarding Conflicts of Interest. General Counsel The General Counsel has full responsibility for all legal matters affecting the Company and is primarily responsible for overseeing the investigation of fraud related to claims and underwriting. Page 4 of 20

5 Section II Fraud and Complaint Handling Procedures The Company has adopted policies and procedures for reporting and investigating allegations of suspected improper activities. These procedures include the establishment of a confidential and anonymous way to report concerns or complaints either electronically or through a hotline. If the matter involves external fraud the matter should be referred to the Anti Fraud Coordinator or General Counsel, as applicable. Employees providing information on suspected fraud or improper activities by an employee or officer of the Company should notify their supervisor, the HR Manager, President or the Compliance Director. No other Employee or Insurance Producer should attempt to personally conduct investigations or interviews related to suspected fraud. Great care must be taken in the investigation of suspected improprieties or irregularities so as to avoid mistaken accusations or alerting suspected individuals that an investigation is under way. Any person reporting a suspected fraud must adhere to the following restrictions: Do not contact the suspected individual in an effort to determine facts or demand restitution. Do not discuss the case with any Company employee or insured other than the Anti Fraud Coordinator, General Counsel, or Compliance Director, as applicable, unless directed or authorized to do so by one of these individuals. Do not discuss the case, facts, suspicions, or allegations with anyone outside of the Company unless specifically asked to do so by the Anti Fraud Coordinator, General Counsel or Compliance Director. Refer all press and outside inquiries to the Anti Fraud Coordinator. All services of process are to be referred to the General Counsel. Confidentiality The Compliance Director, Anti Fraud Coordinator and General Counsel are responsible for receiving relevant information on a confidential basis from employees, policyholders, insureds, Insurance Producers, or third parties who suspect dishonest or fraudulent activity. The results of investigations conducted by the Compliance Director, Anti Fraud Coordinator, the General Counsel, or their designee are not to be disclosed or discussed with anyone other than those persons who have a legitimate need to know. This is important in order to avoid damaging the reputations of persons suspected (but subsequently found innocent) of wrongful conduct, to protect confidential sources of information and to protect the Company from potential civil liability. Page 5 of 20

6 Section III Training Education and Training of Employees New and existing underwriters, auditors, consumer service and other appropriate employees must be provided with not less than two hours of education and training every two years on insurance fraud awareness, detection and referral or reporting procedures, including awareness of and expectation of compliance with the Company s Privacy Policy and Code of Conduct. Claims personnel must undergo not less than three (3) hours of such education and/or training annually. Applicable new employees shall be provided with the Company s most current version of its Anti Fraud Plan and related material upon employment and shall receive antifraud education and training on the detection of fraud within six (6) months of the effective date of employment. Education and Training of Insurance Producers The Company s new and existing independent Insurance Producers shall be offered anti fraud education and training through regularly conducted seminars as well as issuance of underwriting and operating practices memoranda throughout the year and at the time of appointment, as to new producers. In addition to annual seminars, the Company, where possible, will provide personalized training to Insurance Producers who either request the training or who the company decides require additional training based on the results of an annual audit. This Anti Fraud Plan and the ALTA Office Security and Privacy Guidelines are available on the Company s website and Insurance Producers are encouraged to read and familiarize themselves with their contents. Links to other sites dedicated to raising awareness, as well as detecting and preventing mortgage fraud are also included to provide additional information and resources to our Insurance Producers. Courses of instruction Courses of instruction and training shall be designed to address specific aspects of fraud associated with title insurance and escrow closings including how to detect and prevent flip transactions; proper escrow account reconciliation procedures to prevent theft of premiums and closing funds by producers; verification of the identity of parties to a transaction; and warning signs/detection of fraudulent conveyances; as well as training on how to recognize suspicious claims and the procedures to follow for the referral of suspicious claims to appropriate personnel. Such courses shall provide at least two (2) hours of education every two (2) years to all employees and Insurance Producers with the exception of claims personnel who must receive not less than three (3) hours of such training or education annually. Courses may be developed and conducted either by internal personnel or outside contractors. Page 6 of 20

7 Training of Consumers Because we believe that a well informed consumer is the first line of defense against fraud, the Company provides links on its website for consumers to obtain information on the risks of and tips for preventing fraud, including mortgage fraud, identity theft and mortgage rescue and loan modification scams. Section IV Privacy Policy and Code of Conduct Privacy Policy Procedures We limit purposeful or inadvertent access to information by our employees. Only employees with a legitimate business reason have access to personal information about our Insurance Producers and customers. We maintain physical, electronic, and procedural safeguards to protect information. Physical safeguards: We operate in a secure environment. Our offices are locked and inaccessible to all but Company personnel. Employees are not permitted to allow a door key or passkey to be used by unauthorized persons. If a passkey is misplaced by an employee or if an employee is terminated, the HR Department is immediately contacted so that the lost passkey can be deactivated. Borrowing/loaning passkeys is not permitted. To protect the confidentiality of all files, including client, Insurance Producers, and employee files or similar information in their possession, employees are required to comply with the Company s Document Data Retention, Security and Destruction Policy (HR 24). Files containing personal information are stored in locked cabinets or, for long term storage, in locked off site facilities with access limited only to designated employees. Electronic safeguards Employees are allowed access to secure areas on a need to know basis. Employees must view only that information necessary to the task at hand. Employees must keep passwords confidential and make them unique. Employees must change passwords every sixty (60) days. Employees must never allow passwords to be used by unauthorized personnel. Unattended computers automatically lock up after fifteen (15) minutes of non use. The authorized operator can log back in easily, but unauthorized personal are blocked from access. Laptops are encrypted to prevent access by unauthorized individuals in the event the equipment is lost or stolen. Company provided cell phones require a password to access. Page 7 of 20

8 Procedural safeguards: In accordance with our Employee Handbook, no employee should ever disclose to any other person or entity information that is obtained from Company records. Insurance Producers are required by contract to provide Privacy Notices to all appropriate parties. All sensitive information that is not required to be stored is shredded after use. We provide shredding machines in several different locations throughout the building so as to promote their use. A commercial shredding company is contracted on a monthly basis to perform large scale shredding of sensitive documents. To assure service providers, Insurance Producers, and contractors abide by our security measures as it relates to private information, we have added provisions to contracts we sign so as to make these security measures enforceable events. Responsible Official The Compliance Officer is the individual with overall responsibility for implementation of our Privacy initiatives. Code of Conduct The Company has adopted a Code of Conduct that is to be signed by each employee and member of our Board of Directors. It is intended to set out basic principles with which we expect all employees, officers and directors to comply. Our Privacy Policy and Code of Conduct is communicated to our employees at the following times: initially, upon employment via our Employee Handbook distributed by our Human Resource Department and during employee training. The Policy and Code are also made consistently available to all employees via the Company s intranet employee site. Audit The Anti Fraud Coordinator reviews our practices regarding Privacy when conducting an annual review of compliance with this Plan. In addition, our Audit Department continually assesses compliance with our Privacy Policy in many of the Insurance Producer reviews performed throughout the year. Any discrepancies, shortfalls and/or recommendations are reported to the Company s management. Page 8 of 20

9 Disciplinary Action Company personnel policies require employees to follow the Company s written instructions and procedures. Consistent with these policies, the Company may impose disciplinary measures for actions not in compliance with its Privacy Policy, Code of Conduct or Policy Regarding Conflicts of Interest. Section V Internal Fraud Detection, Investigation and Reporting All officers and employees of the Company are responsible for recognizing potential fraud and improper business activities. All Company officers and employees are expected to be familiar with the types of improprieties that might occur within his/her area of responsibility and be alert for any indication of irregularities. All suspected irregularities are to be reported in accordance with the Policy on Reporting and Investigating Allegations of Suspected Improper Activities. Actions Constituting Internal Fraud Any dishonest or fraudulent act or attempted act by employees of the Company. Forgery or alteration of any document relating to the Company s insurance policies or insured parties. Forgery or alteration of checks, bank drafts, or any other financial documents. Fraudulent alteration, addition or removal of information on the Company s management information systems. Misappropriation of funds, securities, supplies, computers, or other assets. Improprieties in the handling of monies or reporting of financial transactions. Public disclosures of confidential Insurance Producer or policyholder information without appropriate approval. Disclosing to other persons the confidential or private business activities of the Company. Accepting or seeking anything of material value from applicants, Insurance Producers or other interested parties in exchange for special consideration in the application, underwriting, auditing or claims process. Unauthorized destruction, removal or conversion of records, furniture, fixtures, and equipment, or assets belonging to the Company. Any false statement made to law enforcement agencies, prosecutors or the insurance departments of any state. The payment of any commission to an unlicensed Insurance Producer. Fraudulent alteration, addition or removal of Insurance Producer or insured information on the Company s management information systems. Any similar or related irregularity. Page 9 of 20

10 Guidelines and Procedures for Conducting Investigations of Internal Fraud When a report or allegation is received, the person receiving the complaint or allegation will interview the reporting party to assess the nature of the allegations, obtain the names of all suspects and detail the extent of evidence available to support the alleged occurrences. If the report or allegation is received by anyone other than the Compliance Director, the person receiving the complaint or allegation will promptly provide a written report of the interview to the Compliance Director who will assign the matter for investigation. The reporting party is to not to discuss the matter with anyone unless specifically requested to do so by the Anti Fraud Coordinator, General Counsel or Compliance Director. Unless deemed necessary by the Compliance Director, all investigations of internal fraud shall be conducted by the Compliance Director with assistance, as requested, from the General Counsel and/or Anti Fraud Coordinator. The company will not contract with an outside firm for the conduct of investigation unless approved on a per case basis by the President and the firm agrees, in writing, to comply with this Plan and all applicable laws and regulations, including Maryland licensing laws. If law enforcement or the Insurance Fraud Division of a regulatory agency are notified or are conducting an independent investigation of an employee, the Compliance Director, any outside firm contracted to perform an investigation and all employees shall provide their full cooperation in the investigation and prosecution of the matter. The Compliance Director, or his or her designee, will determine if the allegations of fraud can be verified through a review of accounts, files, or system data. Consideration will be given, as appropriate and necessary, to taking measures, such as data backups or securing workstations, to protect documents and records that may be relevant to the fraud allegations. In those instances in which the Compliance Director believes it to be in the best interest of the Company, he/she has the authority and duty, after consulting with appropriate executives, to: Take control of, and/or gain full access to all Company premises, whether owned or rented; Examine, copy, and/or remove all or any portion of the contents of the Company files, desks, cabinets, computers and other storage facilities on the premises without prior knowledge or consent of any individual who may use or have use of any such items or facilities in accordance with applicable local, state, and federal laws; and Notify appropriate law enforcement and regulatory agencies The Compliance Director or his or her designee and a member of Company management will meet with the suspect to gain his/her explanation of the situation. If it appears that a further in depth investigation is required, the suspect employee will be placed on immediate suspension pending the outcome of the investigation. It will be made clear to the suspect employee that his/her employment is not being terminated and salary and benefits will continue. The employee will be instructed to call the Anti Fraud Coordinator each morning at a specified time to ensure that the Company is aware of suspect s location during the course of the investigation. Page 10 of 20

11 The following steps will be immediately taken: The suspect will be escorted to his/her desk by the HR Manager or another member of management and permitted to gather his/her personal effects. The employee must not be permitted to remove any Company documents or equipment from his/her work area. The employee will be requested to surrender all keys and access cards for the duration of the suspension. The receptionists, Human Resources Department, and Information Technology Department will be notified that the subject is not permitted to enter the Company s offices or access its systems for the duration of the investigation. The employee will be instructed not to return to the Company offices unless specifically told to do so by the Anti Fraud Coordinator or a member of the Company s senior management. The employee should be told not to attempt to contact any other employee during the course of the suspension. The suspect employee should be escorted out of the building by the HR Manager or another member of management. At no time during the interview and physical removal process should the employee be left unobserved. This is to prevent the destruction of evidence by the suspect. Any Company documents, assets, or computers in the suspect employee s possession but located outside of the Company s premises should be immediately recovered. The recovery of such items should be done by the HR Manager, accompanied by the suspect employee and one other member of the Company s management. The suspect s office, desk, files, and computer will be immediately secured. Other employees should not be allowed access to any evidence that could prove useful during the investigation. Until the completion of the investigation, employees will be instructed not to contact or speak to the suspect. Information regarding the progress of the investigation should only be shared with employees or outsiders who have a legitimate need to know. If the investigation reveals a probable fraud, a comprehensive review of the suspect s complete operational activities will take place to discover undetected frauds and possible collusion with other employees or outsiders. The suspect should once again be permitted to explain his/her actions and the events of the alleged fraud. Selected evidence will be presented to the suspect when appropriate to elicit responses and further explanations. If the suspect confesses to fraud, a witnessed, handwritten statement detailing the fraud should be obtained from the suspect. Page 11 of 20

12 Termination due to Internal Fraud Management will terminate employment if the commitment of fraud is established to the Company s satisfaction. If an investigation results in a recommendation to terminate, the recommendation will be reviewed for approval by the appropriate Company officers before such action is taken. No termination action will be taken without a comprehensive review by the Company s internal Legal and Human Resources Departments. Reporting of Internal Fraud The Compliance Director will provide a written report to the Anti Fraud Coordinator and Compliance Officer upon completion of the investigation. If the investigation determines that fraudulent activities have occurred, the Anti Fraud Coordinator will provide a copy of the written report to the appropriate law or regulatory enforcement body and refer the matter to Counsel to take any necessary and appropriate legal action. The report and all related work product shall be handled in accordance with the Company s Standards as to Work Product and shall accurately set forth, in complete detail, all evidence, both known and suspected and both favorable an unfavorable to the person or persons alleged to have committed the fraud. The Company will fully cooperate with law enforcement in the prosecution of all insurance fraud cases. If the matter is referred to the courts, all subpoenaed records shall be promptly and fully provide and any employee subpoenaed to testify shall provide full, truthful and honest testimony in accordance with the Company s Standards as to Courtroom Testimony. If the loss is quantifiable, a claim should be filed with the Company s fidelity insurance carrier and the Company will consider taking civil action to obtain restitution. Section VI Claims and Application Fraud Detection, Investigation and Reporting The Underwriting and Claims department is the lead business unit responsible for the prevention, detection and investigation of claims and underwriting fraud. Claims forms used by the Claims Department contain anti fraud disclaimers required by the laws of the state in which the claims form is used. Actions Constituting Claims and Application Fraud Deliberate omission or falsification of information relative to an interest in title to be insured. Submission of a false claim in any manner. Alteration of legal documents such as deeds, mortgages, releases, affidavits, etc. Providing false information regarding the claimant. Offering or providing anything of material value to any Company officer or employee or Insurance Producer in exchange for special consideration in the underwriting or claims process. Any similar or related irregularity. Page 12 of 20

13 Guidelines and Procedures for Conducting Investigations of Claims and Application Fraud If a claims or underwriting fraud or irregularity by an insured, beneficiary or third party is alleged or suspected; the General Counsel will assign the matter for investigation. The investigation may consist of a documentary review of the Company s internal records, the records of the Insurance Producer, public record filings and the records of the insured. The investigation may also include interviews of the Insurance Producer, insured, and other persons as deemed appropriate. All investigations of claims and application fraud shall be conducted by the General Counsel with assistance, as requested, from the Anti Fraud Coordinator. The company will not contract with an outside firm for the conduct of investigation unless approved on a per case basis by the President and the firm agrees, in writing, to comply with this Plan and all applicable laws and regulations, including Maryland licensing laws. If law enforcement or the Insurance Fraud Division of a regulatory agency are notified or are conducting an independent investigation of a person alleged to have committed a fraud, the General Counsel, any outside firm contracted to perform an investigation and all employees shall provide their full cooperation in the investigation and prosecution of the matter. Reporting of Claims and Application Fraud The General Counsel will provide a written report to the Anti Fraud Coordinator and Compliance Officer upon completion of the investigation. If the investigation determines that fraudulent activities have occurred, the Anti Fraud Coordinator will provide a copy of the written report to the appropriate law or regulatory enforcement body and refer the matter to Counsel to take any necessary and appropriate legal action. The report and all related work product shall be handled in accordance with the Company s Standards as to Work Product and shall accurately set forth, in complete detail, all evidence, both known and suspected and both favorable an unfavorable to the person or persons alleged to have committed the fraud. The Company will cooperate with law enforcement in the prosecution of all insurance fraud cases. If the matter is referred to the courts, all subpoenaed records shall be promptly and fully provided and any employee subpoenaed to testify shall provide full, truthful and honest testimony in accordance with the Company s Standards as to Courtroom Testimony. If the loss is quantifiable, a claim should be filed with the Company s fidelity insurance carrier and the Company will consider taking civil action to obtain restitution. Page 13 of 20

14 Section VII Insurance Producer Fraud Detection, Investigation and Reporting In the title insurance line, the greatest risk of loss due to fraud relates to theft of escrow funds by Title Insurance Producers. Accordingly, this Company s anti fraud program focuses on a strong Insurance Producer approval process to weed out dishonest producers before they are appointed as a representative of the Company. This process, combined with ongoing monitoring of Insurance Producer data to detect trends which may indicate improper activity and conducting annual audits to ensure the integrity of each Insurance Producer s trust account and compliance with state insurance regulations, is fundamental to our approach. Members of the Company s senior management review all Insurance Producer applicants at the time of application. The application process includes a background check that includes obtaining credit and judgment reports on all principals and escrow account signatories and may include inquiries to state insurance regulators. The Company also verifies that the Insurance Producer has the appropriate licenses and qualifications in the necessary state(s), and that their escrow accounts are in balance. Insurance Producers are expected to adhere to the escrow accounting policies and procedures outlined in the ALTA Standard Procedures and Controls for the Title Industry brochure provided by the Company at the outset of an agency relationship. The Company conducts not less than an annual review of each Insurance Producer at random times of the year to verify compliance with proper escrow accounting procedures. Prevention and Detection of Insurance Producer Fraud The Company employs individuals in each of its primary markets to enlist new Insurance Producers to represent the Company, to visit existing Insurance Producers on a periodic basis, and to assist in the wrap up of business matters with Insurance Producers who are cancelled. The Company provides such individuals with its State Manager s Procedures Manual which details the Company s requirements for the establishment, maintenance and termination of agencies to ensure that they are aware of and adhere to the Company s policies and procedures related to its independent Insurance Producer network. It is standard practice in the title insurance industry for Insurance Producers to underwrite risks, issue policies and collect premium. Title insurers often only become aware of the fact that they have undertaken a risk when the policy is reported as issued to the insurer by the producer. This practice leaves open the potential for the diversion of premium dollars by Insurance Producers by simply not reporting the issuance of policies. To minimize this risk of fraud, the following steps are taken: To minimize the number of policy forms in an Insurance Producer s possession, all requests for policy/commitment forms are approved by the head of our support division. Before approval is given, certain variables are reviewed, including the number of policies currently in the producer s possession of the type he or she is requesting; the date of the last report from the producer, and the producer s premium production. If this review indicates that problems may exist with premium remittances, including an excessive supply of commitment or policy jackets in the producer s Page 14 of 20

15 possession, depending on the specific circumstances, either the request for additional supplies is denied outright and an employee is sent to audit the Insurance Producer s supplies and/or premium escrow account or a small number of forms are shipped based upon a commitment by the Insurance Producer to submit a report of issued policies by a mutually agreed upon date, usually no more than two weeks later. If the report is not subsequently received, an audit is then conducted. Supplies are acknowledged as having been received by the Insurance Producer by two means: first, the package is signed for when delivered, and; second, the Producer is requested to sign and return a form acknowledging the receipt of the specific policy and commitment jacket numbers supplied to him or her. Supply registers are maintained for each Insurance Producer in the Company s computer database. As a policy or commitment is reported as issued or voided, it is entered into our computer, the correct premium is tabulated, and the policy/commitment number is noted in the database as having been accounted for. In this manner, we are able to maintain an accurate listing of all supplies in an Insurance Producer s possession. Supply audits are conducted on an annual basis to reconcile the status (i.e. unused; issued, to be reported, etc.) of all supplies in an Insurance Producer s office to the records maintained in the Company s database. The Company s Audit Department conducts a review of each Insurance Producer s escrow accounting procedures on not less than an annual basis following the policies and procedures set forth in the Company s Auditing Manual. In addition, this department serves as a first line of defense in determining the extent of loss and limiting those losses as much as possible when a defalcation occurs. The objectives of this department in reviewing Insurance Producer operations are to verify that: The existing system of internal controls provide adequate assurance that errors or irregularities are minimized and that they are detected in a timely manner if they do occur; The Insurance Producer s assets are adequately protected against unauthorized use; Escrow practices provide acceptable execution of the Insurance Producer s fiduciary responsibilities; Underwriting documentation practices are in accordance with guidelines of the Company; and The Insurance Producer is complying with accounting policies and procedure requirements of the Company. To accomplish these objectives, this department reviews each Insurance Producer s policies and procedures, evaluates the system of internal controls and performs testing including: Page 15 of 20

16 A review of escrow bank account reconciliations to determine the timeliness and reasonableness of reconciling items; A test of the timely depositing and posting of escrow receipts; A test of adherence to authorized rate and fee schedules; and A review of files to verify adherence to procedures of the Company and prudent underwriting and escrow practices. An Annual Review Report, which includes the findings of the audit team and their recommendations for corrections, is forwarded to the Insurance Producer for his or her response shortly after each audit. In addition, a copy of the report is given to the Company s Review Committee, along with the Audit Department s recommendation as to retention, necessary corrective measures that must be implemented, or termination of the Insurance Producer. The Review Committee, consisting of top officials of the Company and heads of the Company s claims, audit and marketing division, meets on a weekly basis to review the results of each Insurance Producer s annual review as well as the production, claims history and credit/judgment reports run on each principal and escrow account signatory. Each Insurance Producer is assigned an escrow risk rating, underwriting risk rating and a credit risk rating and, if follow up is required, responsibility for that follow up is assigned to a designated individual. Actions Constituting Insurance Producer Fraud Failure to comply with federal, state and local laws and regulations including insurance laws and regulations. Having any improper or illegal financial dealings or failure to exercise fiduciary responsibility to the Company, any policyholders of the Company, or any other person. The payment of any commission to an unlicensed producer. Deliberate omission or falsification of information relative to an interest in title to be insured. Forgery, unauthorized alteration or unauthorized duplication of the Company s forms. Offering or providing anything of material value to any Company employee in exchange for special consideration in the application or underwriting process. False or fraudulent representations, including false advertising regarding the Company policies or financial strength. Any fraud or impropriety involving agent commissions. The withholding or fraudulent conversion of premiums. The improper conversion of escrow funds. Any similar or related irregularity, including churning or twisting. Page 16 of 20

17 Guidelines and Procedures for Conducting Investigations of Insurance Producer Fraud If an irregularity is suspected or discovered during an audit, the on site auditor will immediately contact the Ant Fraud Coordinator who will be responsible for overseeing and coordinating the evaluation, resolution and prosecution of the fraud. When a complaint is received that may involve the mishandling of funds or other fraudulent activity by an Insurance Producer, the Anti Fraud Coordinator will contact the Producer to obtain the Insurance Producer s statement of facts. Back up documentation to verify these statements is required to be faxed or sent via overnight delivery in order to quickly assess the validity of the complaint/claim. If the Insurance Producer s response or documentation is not satisfactory, the Anti Fraud Coordinator will assign the matter for investigation and immediately dispatch an auditor to the Producer s office to conduct further investigation. When possible, a State Manager, a member of the Company s Claims Department and the Anti Fraud Coordinator will participate in the on site investigation. If a shortage of funds is discovered to exist as a result of fraudulent activity, the Insurance Producer s authority to represent the Company will be immediately terminated and a forensic analysis will be conducted to quickly evaluate the extent and cause of the shortage. If the Insurance Producer refuses to cooperate, outside legal counsel will be immediately engaged to seek a court order freezing all funds remaining in the escrow account and to authorize unfettered access to the Producer s records, computer data and books of account. Efforts to identify potential sources of recovery are also pursued at this time. Investigators All investigations of Insurance Producer fraud shall be conducted by the Anti Fraud Coordinator with assistance from the General Counsel. The company will not contract with an outside firm for the conduct of investigation unless approved on a per case basis by the President and the firm agrees, in writing, to comply with this Plan and all applicable laws and regulations, including Maryland licensing laws. If law enforcement or the Insurance Fraud Division of a regulatory agency are notified or are conducting an independent investigation of an Insurance Producer, the Anti Fraud Coordinator, General Counsel, any outside firm contracted to perform an investigation and all employees shall provide their full cooperation in the investigation and prosecution of the matter. Reporting of Insurance Producer Fraud The Anti Fraud Coordinator will provide a written report to the General Counsel and Compliance Officer upon completion of the investigation. If the investigation determines that fraudulent activities have occurred, the Anti Fraud Coordinator will provide a copy of the written report to the appropriate law or regulatory enforcement body and refer the matter to Counsel to take any necessary and appropriate legal action. The report and all related work product shall be handled in accordance with the Company s Standards as to Work Product and shall accurately set forth, in complete detail, all evidence, both known and suspected and both favorable an unfavorable to the person or persons alleged to have committed the fraud. The Company shall cooperate with law enforcement and regulatory agencies in the investigation and prosecution of all insurance fraud cases. Notification to the licensing division of the applicable state agency of the termination of an Insurance Producer s license and reason for termination, if due to fraud, will be immediately sent upon termination of the Insurance Producer s authority to represent the Company. If the matter is referred to the courts, all subpoenaed records shall be promptly and Page 17 of 20

18 fully provided and any employee subpoenaed to testify shall provide full, truthful and honest testimony in accordance with the Company s Standards as to Courtroom Testimony. If the loss is quantifiable and covered under its bond, a claim will be filed with the Company s fidelity bond carrier and the Company will consider taking whatever civil action may be deemed appropriate to obtain restitution. Section VIII Anti Fraud Plan Evaluation Monitoring After allegations of fraud are investigated and resolved, the Anti Fraud Coordinator, General Counsel and Compliance Director will jointly review the Company s procedures in the detection, investigation and prosecution of the fraud to determine if existing procedures were proper and adequate and, if not, to recommend changes to the Company s Anti Fraud program to improve its effectiveness. Annual Review The Anti Fraud Coordinator conducts an annual review of the anti fraud program in place at the Company and reports the findings to the President and Risk and Audit Committees of the Board of Directors. The purpose of this review is to: Provide a thorough business risk assessment of the policies and procedures in place at the Company targeted at the prevention, deterrence and early detection of fraud and related wrongful acts; Assess the awareness level of the existing anti fraud program and plan in all departments; Determine whether the overall anti fraud program in place remains accurate, relevant and effective; and Verify that the Plan meets regulatory and compliance requirements. Page 18 of 20

19 Annual Reporting Certain states require insurance companies to file annual complaint logs, annual reports summarizing the Company s anti fraud activities and to file annual updates to its Anti Fraud Plan. The Compliance Officer is responsible for the timely filing of such reports as required. A copy of the Annual Review, the most current version of this Plan and a copy of any reports submitted to regulatory authorities will be maintained in accordance with the Company s document retention policy and will be made available for review by such regulatory agencies for verification of compliance with and effectiveness of this Plan. Page 19 of 20

20 Section IX Key Contacts The name, address, phone number and e mail address of the Anti Fraud Coordinator, General Counsel, Compliance Officer and Compliance Director are listed below. In the event that any of this information changes, the list of Key Contacts will be updated accordingly and communicated to all appropriate parties. Anti Fraud Coordinator Contact Name Kathleen J. Henry Senior Vice President and Risk Management Mailing Address The Security Title Guarantee Corporation of Baltimore Six South Calvert Street Baltimore, MD Phone Number E mail: HKHenry@eSecurityTitle.com General Counsel Contact Name Mailing Address John Kosogof Vice President and General Counsel The Security Title Guarantee Corporation of Baltimore Six South Calvert Street Baltimore, MD Phone Number E mail: JKosogof@eSecurityTitle.com Compliance Officer Contact Name Mailing Address Marlene R. McGraw Asst. Vice President and Corporate Secretary The Security Title Guarantee Corporation of Baltimore Six South Calvert Street Baltimore, MD Phone Number E mail: MMcGraw@eSecurityTitle.com Compliance Director Contact Name Ben Mason Mailing Address 9920 Hoyt Circle Randallstown, MD Phone Number E mail: BMason@host.sdc.edu Page 20 of 20