Banks can issue a recall, but it is only good if the money is still there. While most banks are heavily regulated, and it’s not easy for criminals to set up a scam account, they can use stolen yet legitimate information to set up shell companies, making it difficult to follow and retrieve the money.
Advisors can remind clients that they should pay close attention to the following when considering an instant payment:
- Consider the source of the request. For example, have they met this individual previously, or is it a new contact?
- Review the communications vehicle. For example, if they normally communicate via secure email with their banking provider, why are they now receiving a call or text? They should also check if an email is coming from a fake account pretending to be a trusted source. For example, a username that says “Amazon Corporate Affairs” but has a mismatched domain address should raise a red flag.
- Refrain from feeling pressured to move quickly. When in doubt, they should disconnect the communication until they are confident in the request or have spoken with their bank directly or their advisor.
Stopping this nefarious behavior requires an all-hands-on-deck approach. Advisors can educate their clients on these risks and help guide them through evaluating a situation should they have questions.
Better Safeguarding Clients Starts With Continuous Communications
Advisors can take many steps to improve awareness of these types of fraud — and help stop it — all while deepening their relationships with clients.
A few ways that clients can increase their security include:
- Using two-factor authentication at login, like entering a passcode from a text in all financial applications that offer it.
- Being cautious when reacting to unsolicited requests for money or information.
- Using a password-keeper application to ensure the highest levels of security.
A few ways that RIAs can increase security within their organizations include:
- Bring visibility to the state of fraud through educational materials or lunch and learns.
- Work with their bank to require dual approval at the company to release funds.
- Set up independent processes that establish trust, like appointing individuals to fraud prevention teams so they can work together to approve payments and flag irregular behavior.
Working alongside their custodian and clearing firms, advisors can provide critical information about clients’ preferences to improve pattern detection and help limit the potential for fraudulent activity. If an advisor offers banking and lending services through a bank partner, they should feel empowered to speak with their bank and learn about the securities in place to protect their clients or businesses.
In an age where everyday communications have largely been relegated to emails and quick catchups, a financial advisor’s proud tradition of truly knowing their clients can take center stage with these suggestions. As the year comes to a close, scheduling these conversations with clients can mean all the difference for a happy holiday season and a financially healthy new year.
Gino DeRango is senior vice president of Axos Advisor Services.
