Client funds and commercial crime: questions property managers should document

Document which entity receives rent, holds deposits, approves invoices, changes banking details, and releases contractor payments. Include property-specific trust or operating accounts and outside accounting access. A portfolio can change materially when a manager begins handling a new payment function, even if no new building is added.

Bring bank-signatory records, approval workflows, payment-change procedures, reconciliation reports, and a sample of a completed vendor-payment file. The goal is a factual operating record. It should show how staff verify a changed instruction and who can override or authorize a payment.

Compare employee theft, client-property or client-funds wording, funds-transfer fraud, social-engineering treatment, computer-fraud language, deductibles, sublimits, discovery provisions, and conditions. A fraudulent instruction and an unauthorized transfer may be treated differently by a form, so preserve the exact question and form reference.

Revisit the record when the accounting platform, bank approval process, staffing model, or vendor-payment workflow changes. NIST describes phishing and verification practices that can inform internal controls but do not determine policy response. Policy wording, declarations, and endorsements control.

• Account ownership and signers
• Payment-change verification
• Client-funds and fraud wording
• Dated reconciliation and exception records

Start with a diagram of money received and money paid: rent, security deposits, owner distributions, vendor invoices, refunds, and management fees. For each flow, note whose money it is, which legal entity holds the account, which staff can approve a transaction, who performs reconciliation, and what documents authorize an exception. California Department of Real Estate trust-fund guidance applies to licensed real-estate activity and distinguishes trust funds from a broker’s own funds; the operating record should not blur those categories.

Do not assume the insurance answer follows the accounting label. A crime form may define covered property, insured ownership, employee, computer instruction, or transfer in its own terms. Bring the bank and accounting record into the coverage discussion, and ask which policy provisions address funds held for others.

Consider three different fact patterns: an employee diverts deposits, a criminal impersonates a known vendor and induces an authorized transfer, or staff accidentally pay the correct vendor twice. They may produce a similar bank shortfall but raise different questions about employee theft, funds-transfer fraud, social engineering, voluntary parting, or error. Neither a “crime” label nor a cyber package title tells you which one is insured.

A useful comparison asks for the definition of employee, covered funds, client property, authorized transfer, fraud, and discovery. It also identifies sublimits, retentions, verification conditions, exclusions, and the required notice destination. Put the question in writing with a factual example, then preserve the form and response. Do not describe a hypothetical as a claim outcome.

A payment-change request deserves a different process from an ordinary approved invoice. NIST advises verifying suspicious requests using contact details already known or independently obtained, rather than replying to the message that initiated the change. A property manager can translate that principle into a recorded call-back, dual approval, restricted vendor-master edits, and a separate reconciliation by someone who did not initiate the transfer.

The file should show how an owner’s new distribution instruction, a contractor’s changed bank account, or a request for an urgent refund is authenticated. Store the original message, the independently sourced contact detail, the verifier’s name, and the approval trail. If a control cannot operate during an emergency, document the exception path before one occurs. These are operational controls, not a promise that an insurer will cover a failure.

If a transfer appears fraudulent, contact the financial institution promptly through a trusted channel and follow its recovery instructions. The FBI Internet Crime Complaint Center describes rapid financial-institution contact and reporting for business-email-compromise incidents. Preserve the payment confirmation, beneficiary details, account-change request, messages with full headers where available, call logs, user-access logs, and the exact time the discrepancy was found.

Also check the relevant policy’s discovery and notice provisions without waiting for a complete internal investigation. Assign a single incident log owner so later corrections are appended rather than overwriting original observations. Coordinate any legal, privacy, or law-enforcement decisions with appropriate professionals; this educational checklist does not replace those decisions.

When comparing proposals, avoid evaluating only the overall crime limit. Identify the largest owner distribution, contractor payment, and aggregate funds exposure the manager actually handles, then compare the sublimit and retention that might apply to each described event. Ask how multiple transfers, multiple owners, or a long period before discovery would be treated under the particular form.

Keep an annual control review with bank signers, role changes, dual-approval evidence, reconciliation exceptions, vendor-master changes, and incident lessons. Repeat it after changing accounting software, banking arrangements, or management services. Insurance can be one part of risk management, but controls and reliable records remain necessary regardless of the form purchased.

For example, if a manager holds deposits for several owners but releases contractor payments from a separate operating account, show those flows separately. Do not add every balance into one unexplained total or assume the same provision governs all accounts. An insurer may request different evidence for ownership, access, or payment authority; a clear funds map is useful before those questions arrive.

• Funds-by-owner and account map
• Payment-change verification evidence
• Crime form and sublimits
• Incident log and bank contact plan