Fraudulent BD Account Transfers on the Rise: FINRA

The notice warns that a bad actor “may use the efficiencies ACATS offers to effect the fraudulent transfer of customer account assets — ACATS fraud — by opening a new brokerage account online or through a mobile application at another firm (receiving member) using stolen personal identifiable information of a legitimate customer of another member firm.”

The bad actor, FINRA states, “may then engage receiving and/or carrying members to conduct a transfer of the account of the legitimate customer at the carrying member into the new brokerage account at the receiving member.

“When that transfer is complete, the bad actor may then proceed with moving the ill-gotten assets out of the newly established brokerage account to another external account or financial institution,“ the regulator explains.

FINRA’s notice describes how broker-dealers can spot ACATS fraud, which includes a request for assets to be transferred to an external account or financial institution soon after a new account is opened, as well as changes in customer communication patterns.

The notice also describes practices that broker-dealers have implemented to mitigate the risk of ACATS fraud.

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