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Be Aware, Email Based Wire Fraud Is On The Rise

The FBI and FINRA have recently issued alerts about the rise in email-based scams that request advisers to wire client funds.

The alerts warn that scammers are hacking into email accounts to gain access to personal information.  The scammers have become more sophisticated, than in the past.  They study the tone and style of the intended victim’s emails, look for personal information, such as account numbers and signature blocks, and then send phony emails to the victim’s financial contacts.

Over the past few months, our clients have shared the following real-life scenarios:

  • Adviser receives an urgent email request for funds to purchase a condo inFlorida.  Since the client was planning to purchase a condo inFlorida, this request seems legitimate.  The introduction in email even matched the familiar greeting between client and adviser of “Hey Buddy.” 
    • The “real” client realized that their email was hacked and informed adviser before funds were sent. 
  • Adviser receives an urgent request for funds by email with a follow up phone call to adviser’s office.
    • Adviser knows the client well and does not recognize the voice of the caller.  Adviser does not send funds, contacts the “real” client and the client’s custodian about the attempted fraud.
  • Adviser receives an urgent email request for funds that states the client is traveling and will not be available by phone.  Client will sign any required documents the next day, but money must be sent today.  Since client travels often, the request seems appropriate. 
    • Adviser sends funds and learns later that the request was not legitimate.

Although there is no guarantee that you can prevent becoming a victim of fraud; financial advisers should review their current practices and where necessary institute additional procedures to help detect fraud and protect client assets.  Advisers should consider implementing the following practices:

  • Review current procedures to determine potential risks to clients and the firm
  • Educate clients about the potential for fraud and phishing attacks 
  • Inform clients of any newly instituted procedures to help detect scammers 
  • Consider having clients send request verification to facsimile instead of email
  • Review email requests for odd phrases, grammatical errors, poor punctuation and spelling errors that might alert you to a fraudulent request
  • Urgent requests or statements that the client is not currently available may be cause for alarm.  Investigate first before sending funds
  • No matter how urgent the request for funds, do not send funds without first confirming by phone or fax that the client’s request is legitimate.
  • Make sure that when you confirm the request by phone that the voice and speech pattern match the voice and speech pattern of your client
  • Work with the client’s custodian to help identify best practices

Remember, scammers continue to change their method of attack to attempt to deceive even the most sophisticated systems.  Review procedures and inform staff and clients to be vigilant.  Although clients expect good customer service, take time to verify requests before the client and you become a victim of a scam.

Additional information about how to detect fraud and scams may be found using these links. 

FBI: http://www.ic3.gov/media/2012/EmailFraudWireTransferAlert.pdf and FINRA:  http://www.finra.org/investors/protectyourself/investoralerts/fraudsandscams/p125460?