How advisors can protect clients from instant pay fraud

Banks can issue a recall, but it’s only good if the money is still there. While most banks are highly regulated and it is not easy for criminals to set up a fraudulent account, they can use stolen but legitimate information to set up shell companies, making it difficult to trace and recover money.

Advisers can remind clients that they should pay particular attention to the following when considering an instant payment:

Consider the source of the request. For example, have they met this person before or is this a new contact?
Examine 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 comes from a fake account that claims to be a trusted source. For example, a username that says “Amazon Corporate Affairs” but has an inappropriate domain address should raise a red flag.
Avoid feeling pressured to move quickly. If in doubt, they should disconnect communication until they are confident in the claim or have spoken directly to their bank or adviser.

Stopping this nefarious behavior requires an all-hands-on-deck approach. Advisors can educate their clients about these risks and help guide them through evaluating a situation if they have questions.

Better customer protection starts with continuous communication

There are many steps advisors can take to raise awareness of these types of fraud—and help stop it—while also deepening their relationships with clients.

Some ways customers can increase their security include:

Using two-factor authentication at sign-in, such as entering a passcode from a text in all financial apps that offer it.
Be cautious when responding to unsolicited requests for money or information.
Using a password keeper application to ensure the highest levels of security.

Some ways RIAs can increase security within their organizations include:

Bring awareness to the state of fraud through educational materials or lunch and learns.
Work with their bank to get double approval from the company to release funds.
Create independent processes that build trust, such as appointing people to fraud prevention teams so they can work together to approve payments and flag misconduct.

Working alongside their custodian and clearing firms, advisors can provide critical insights into client preferences to improve pattern detection and help limit the potential for fraudulent activity. If an advisor offers banking and lending services through a banking partner, they should feel empowered to talk to their bank and learn about the securities in place to protect their clients or businesses.

In an age where day-to-day communications have largely been relegated to emails and quick retrieves, a financial advisor’s proud tradition of really getting to know their clients can take center stage with these suggestions. As the year draws to a close, scheduling these customer conversations can make all the difference to a happy holiday season and a financially healthy new year.

Gino DeRango is Senior Vice President of Axos Advisor Services.