Wire Transfer Fraud Prevention – 10 Best Practices for Family Offices and High Net Worth Individuals



By Kurt Thoennessen

Wire fraud occurs when large sums of money are stolen from an individual or corporation using the telephone or electronic communications (i.e. internet and/or email) as the primary communications vehicle.  There are thousands of wire fraud crimes occurring every year and millions of dollars stolen with limited recourse for recovery. Family Offices and high net worth individuals have a heightened exposure to this risk because of their access to significant financial resources. This guide provides a high-level overview of 10 best practices that should be implemented by family offices and high net worth individuals.

It is important to manage the human and technological aspects of an organization when designing a plan to prevent wire fraud. Here are five key strategies used to manage the human vulnerabilities that can lead to wire fraud.

  1. Fraud Training – Train staff members to look for signs of deception and the various social engineering tactics, such as CEO impersonation coupled with creating a sense of urgency.
  2. Wire Confirmations – Confirm all changes to vendor/supplier details, (including routing numbers, account numbers, telephone numbers and contact information) by a direct call using the contact number previously provided by the third party or video call.
  3. Segregation of Duties – Require all outgoing payments or funds transfers be subject to segregations of duties. No one individual can control the entire process.
  4. Security Audit – Conduct a thorough security audit at least once a year using a checklist to ensure all areas are covered.
  5. Awareness Training – Red flags for potential wire fraud include: Rush requests, wires going to an unknown party for the first time, and requests for sums above the typical range.

Improving security through staff training and procedures is the most effective way to prevent a wire fraud incident, but these methods should be accompanied by technological tactics as well. Here are five key tactics that should be used to manage the technological vulnerabilities that can lead to wire fraud.

  1. Multi-Factor Authentication – Encourage all parties involved in a wire transaction to use a two-step verification process for access to their email accounts.
  2. Complex Passwords – Protect account statements and pre-filled ACH templates with complex passwords.
  3. Email Encryption – Ensure all email traffic that has personally identifying information (PII) enclosed is encrypted in transit and at rest.
  4. Email Critique – Train employees to scrutinize emails for signs of fraud. Some examples include: familiar email addresses may have a character missing, unfamiliar account numbers, and slightly altered links. Also, have multiple authorized employees review wire transfer requests.
  5. Limit Internet Access – Provide limited access to non-business websites and applications.

There are many strategies and tactics a family office and/or high net worth individual can employ to safeguard against wire fraud, but the ones mentioned above are some of the most crucial.

 

 



Kurt Thoennessen

Kurt is a Senior Advisor with Ericson Insurance Advisors and a Certified Advisor of Personal Insurance (CAPI). He works with high net worth individuals and families to design and implement risk management and insurance programs.