Identity fraud is on the rise and it can have a profound effect on your business.
For example, if a fraudster successfully manages to convince you that they’re your client, they may be able to also trick you into performing financial transactions on their behalf. This could include transferring money directly into their account or using your client’s account for money laundering purposes (to conceal the origins of where the proceeds of crime really came from).
The portrait of a sophisticated fraudster
To successfully access someone else’s finances, a sophisticated fraudster will often start by trying to access several pieces of their victim’s identity.
Picture this…
Your client is travelling overseas and needs to send a couple of emails, so they connect to the wifi at a hotel or local cafe through a compromised connection. A fraudster accesses their email, changes the password and takes control of their account. They search through their inbox and find details of your client’s mobile provider. They also find enough personal information to get around the telephone company’s security protocols to then ‘port’ the phone number so your client’s calls are redirected to them.
Because the inbox also contains several emails to you, their adviser, the fraudster emails you directly, asking you to transfer some money under the guise that they want to invest it quickly. Following your usual protocols, you call the client’s mobile to confirm the instructions. They say it’s ok. But, unbeknownst to you, you’re actually talking to the fraudster. So you assume the transaction is legitimate and comply with the request.
Before you know it, you’ve transferred your client’s money directly into the hands of a criminal.
And now you don’t just have an unhappy client, you’re also potentially liable for any money lost.
So what can you do to prevent this from happening? Here are a few things to consider.
Your minimum obligations
The starting place is your statutory obligations. Every financial adviser must know their client’s circumstances well enough to comply with the ‘best interest’ provisions of the Future of Financial Advice FOFA reforms. They also have the legal obligation to report suspicious matters if they think it involves money laundering.
On top of this, most advisers also have internal protocols for dealing with suspicious activity which they’ll need to follow. But not all unusual activity is necessarily suspicious. And for some clients, their ‘normal’ may be ‘unusual’.
On top of this, most advisers also have internal protocols for dealing with suspicious activity which they’ll need to follow. But not all unusual activity is necessarily suspicious. And for some clients, their ‘normal’ may be ‘unusual’.
The power of regular contact
The only way you can possibly detect any irregularity from your client is to understand them as well as possible.
That means meeting with your clients face-to-face or speaking to them on the phone regularly. This won’t just give you a better idea of their frame of mind, but more importantly, it will also let you know what they sound like, the turns of phrase they use and even how they think.
When you’re speaking to your client, ask them about their plans, about their personal circumstances and any other relevant information they’re happy to share. To be extra vigilant, make a note of this information on their file so you can compare it against future unusual activity.