Wire Fraud & Your Advisor

As an investment advisor, we rely on the trust relationship developed with our clients for a range of activities.  The basic relationship is that of a fiduciary allowing us to buy & sell investments on your behalf, but our clients trust us with a host of other matters, as well: financial planning, phone calls for one-off advice on an opportunity, or help with the transfer of funds.  We enjoy the chance to serve you on all fronts.

For that reason, we are posting today to alert you to recent industry conversations surrounding wire fraud.  The challenge of fraud has been around as long as money has, but today the sophistication of would-be fraudsters is as great as ever.  And as your trusted partner we are taking steps to help you combat the hoards that would do you harm.

The financial industry has evolved its practices for the movement of money around the use of forms & documents to create a paper trail, and reliance upon original signatures was deemed the gold standard for hundreds of years.  Today, signed paperwork is still important, but in this digital age the creation of original-looking documents (called forgery) is an all-too-simple process.  And with the proliferation of email use, the ability to impersonate and/or dupe someone has never been easier.  At NWIC we work with our clients and their custodians to help combat fraud, and that has required the continual evolution of our processes.

When we are asked by clients to have their custodian move money to their own verified checking account, the chance for fraud is fairly low: after all, the owner of the accounts is the same person, and typically the process of establishing the true owner of the checking account is done at the time the account is set-up.  However, when a client requests that we have the custodian send their funds to a new, unknown party the burden to establish the authenticity of the request is considerably greater.

There is nothing particularly sinister about what’s called a third-party wire – we help clients wire their funds to third parties to buy houses, pay college tuition, or pay medical bills all the time.  Yet, knowing the request is genuine and that the recipient is an authorized one must be completed at each request, and that’s where you will start to notice some changes.  The new standard process in authentication is now to add voice to written request.  Thus, if you send us an email asking us to send funds to a third party (that is, anyone other than yourself), we will not only ask for you to complete and sign a wire authorization form, but we will also need to speak with you.

Typically, we will simply call you at home or on your cell phone to verify the details and ask you a few questions.  This is not only a chance to correct any typos we discover, but it’s also the best way to engage you in conversation and satisfy ourselves that your request is a valid one, and not that of an imposter.  And be aware: the typical fraud attempt relies on a sense of urgency and drama to cause people to act before thinking.  Thus, if you need funds sent from your account, try to provide us with as much advance warning as possible, and keep us updated on the best phone contact for you.  We look forward to speaking with you!