Identify fraud is on the rise

Jonathan Martin, Macquarie's Fraud Investigations Specialist, shares some simple tips to help protect from identity fraud.

Why building a personal relationship can help prevent fraud

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.

It’s vital that you always trust your instincts when it comes to out of the ordinary behaviour.

Look for unusual activity

Most people will behave a particular way when it comes to their finances. For instance, if someone has done nothing for some time and then suddenly wants to perform an urgent transaction, it should be a warning sign. But other clients will be more erratic in the way they deal with their finances. So it pays to know what their financial habits look like.

One of the hallmarks of a fraudulent transaction is that the perpetrator will ask you to perform it urgently as they only have a limited amount of time to take advantage of a deal. Sometimes, they’ll even claim to be overseas without usual access to their accounts.

So be extra cautious in dealing with any transaction where time is of the essence and never let your standards slip at the request of a client.

Follow up

Fraudulent instructions often come via email. After all, it’s much easier to compromise someone’s email account than it is to impersonate them over the phone. (Although, as our example showed, this can be done too.)

So, if you ever receive instructions you’re not certain about, pick up the phone and speak directly to the person involved - preferably on a landline, as they are more difficult to hack than a mobile phone line.

If you’re still not convinced, call a second number to confirm the identity. Depending on your confidentiality obligations, you could contact a family member or next-of-kin to make sure that their story adds up.

Trust your instincts

Finally, it’s worth remembering that fraudsters are becoming adept at stealing identities and circumnavigating security checks, so even the most comprehensive protocols will sometimes fall short.

That’s why it’s vital that you always trust your instincts when it comes to out of the ordinary behaviour and use more than one method to confirm their identity. And if you think someone has stolen the identity of your client, call the police and the financial institutions involved immediately.

Watch this chilling video to see how easy it is for a scammer to steal your online identity.

Want to know more?

Be aware of the most common scams (you can read more about these on the Scamwatch website) and report any suspicious activity to the police, the financial institutions involved and to Acorn, the Commonwealth government’s online crime reporting network.   

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