Fraud Risks To Be Aware Of

In today’s increasingly digital and non-face to face world, the risk of fraud is a threat we should have in the back of our minds. Whether it’s phishing scams, identity theft, or financial fraud, staying informed and alert is crucial when protecting clients and of course, your firm. This update is designed to keep you informed of some of the key threats we are seeing within the industry, how to recognise the warning signs, and the proactive steps you can take to safeguard clients from harm.

Client Impersonation

One typical scenario: Fraudsters compromise an email address and start to impersonate the client. The compromise has allowed them to gain access to their personal information held within email, they can then forge documents or approach you with various requests. The aim is to make the request seem legitimate, which then results in you instructing withdrawals or transfers from the portfolio.

Red Flags for you to look out for: Changes in client behaviour, unexpected requests, changes in communication patterns (e.g., sudden preference for email over phone calls) or contact details (e.g. new phone number or email), requests for large sums to be transferred to new bank accounts.

Social Engineering Scams

Description: Social Engineering is a tactic used by fraudsters. It involves manipulating the client into divulging confidential information, or making financial transactions they wouldn’t normally request. The threats can originate from phishing emails, fake phone calls, or even in-person deception.

Red Flags for you to look out for: The client receiving unexpected calls or emails requesting urgent safeguarding/action. Communication is from what seems to be a legitimate source (e.g., their bank, tax authorities or even an industry regulator). The aim of the approach is to worry the client, cause confusion and uncertainty about their investments and banking arrangements. In a lot of cases, the client will be manipulated and coached by the fraudster on what to tell their advisers or even their bank if they are questioned on why they’re wishing to withdraw investments and money from the platform. The fraudsters have convinced the client their money is not secure and needs to be forwarded to a safe account. The tactics used by the fraudsters change regularly and it is important to be aware of instructions that do not make economic sense.

Romance Scams

Description: Fraudsters scour the internet, social media and dating sites. They build fake profiles, target the vulnerable and create a fake romantic relationship with the client over time. Eventually, they start to persuade them to send money or share financial information. The amounts sent typically increase over time for various reasons including requests for medical bills or travel needs. Generally, the client (victim) will not meet the fraudster face to face over the course of their “relationship”. However, they will seem loving, charming and want to build a strong emotional connection with their victim.

Red Flags for you to look out for: Clients making unexpected requests or large transfer instructions to personal accounts in the UK or abroad. Secrecy in why something is needed, resistance in discussing financial commitments with you but now discussing these details with a third party.

Preventive measures you can use

Verify Instructions: Always review communications and verify any unusual or large requests through multiple methods such as a direct phone call to the client on a number you recognise if you’ve received a suspicious email.

Monitor Communication Patterns: Be aware of changes in how clients communicate or any signs that someone else might be influencing them.

Use Strong Authentication: Urge clients to utilise Two Step Verification or Two Factor Authentication when accessing their online accounts, including their TOL account. Also consider using these enhanced security measures within your adviser firm.

Regular Reviews: Conduct regular reviews of the client’s portfolio and transaction history, looking for any anomalies that could suggest fraudulent activity.

You can keep up to date by referring to the Security Centre for Advisers hosted on TOL via Information > User Guides.

 

1. Introduction
2. TOL Recent Enhancements 
3. Integrations – It Wasn’t A Quiet Summer!
4. Transact Transfer Specialists
5. Fraud Risks to Be Aware Of
6. Transact And Letters of Authority
7. Transact – BlackRock MPS
8. Utilising Trusts to Give Wealth Away But Still Retain Access
9. Interest on Cash Deposits
10. Transact Events 2024