Pub. 5 2016 Issue 6

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 20 C RIMINALS WHO COMMIT wire transfer fraud can anonymously acquire a lot of money in a short amount of time. With these costly schemes becoming more frequent and complex, it is more important than ever for banks to protect themselves against wire fraud. Wire fraud can occur through phone, fax, email or internet, and the losses can run into the hundreds of thousands of dollars per incident. Small businesses are the most frequent targets because they usually lack the complex security measures of larger organizations while carrying heftier account balances than individuals. Today’s criminals employ countless schemes to convince banks to wire large sums of money to another account, though their basic methods are similar: • a fax to a bank with a customer's information that the customer did not send • an email from the customer's account that the customer did not write • a memo from a call with the "customer" which the customer never made • a confirmation phone call to the number listed in the account, only to later find the number has been diverted temporarily by the criminal. In this case, a verbal confirmation comes from the thief, not the customer. Many fraudulent foreign wire transfers wind up in Asia, Eastern Europe or Africa. These international transfers are the most dangerous because there is limited regulation and no easy way to reverse the process. Domestic wire fraud isn't uncommon either. In the United States, wire transfers have some safeguards in place to manage fraud, but it should be assumed that once a transfer is made, there is no way to bring the money back. The responsibility for the stolen money could fall on the account holder and/or the bank depending on the circumstances. Banks can help safeguard against fraud by taking proper precautions. Be Alert to Red Flags The employee executing the transfer can help identify fraud by staying aware of a few red flags, including abnormally large transfers, first-time account wire transfers and transfers to non-US locations. Another warning sign is when wire instructions include reasons why the “customer” is not available to answer a verification phone call from the bank (i.e. in a meeting, at a funeral, getting on a plane). Encourage bank employees to trust their instincts when something seems amiss in a transfer request. Teaching employees the warning signs could help alert them to potential fraud – even if it might be a temporary annoyance to the customer. While keeping customers satisfied and ensuring quick transactions are both important, secure banking is the principal concern. Ultimately, customers will appreciate your efforts toward the security of their money more than they will a quick, easy transfer. Execute Account Usage Agreements Execute an agreement that details who is authorized to execute a transaction, which accounts are eligible for transfers, what security measures and verification steps are in place, which communication methods are used and who is liable for what if fraud were to occur. BEWARE OF THE WIRE By CraigM. Collins, OneBeacon Financial Services