JANUARY / FEBRUARY 2021 -QTSVXERGI SJ Written Agreements In preventing wire transfer fraud IBA INSURANCE SOLUTIONS Wire fraud losses continue to grow at astounding rates. In 2018, ABA Insurance Services saw a 318% spike in wire fraud claims.1 Over an 11-month period in 2018, the FBI’s Recovery Asset Team handled 1,061 incidents related to fraudulent transfers involving over $257 million in losses.2 What can your bank do to prevent wire transfer fraud? It’s imperative that your staff understand the importance of your bank’s written agreements, as well as follow instructions and procedures in place. Taking shortcuts may cause claims. This article offers a basic construct of written agreements, discusses their importance in today’s banking and insurance environment, and concludes with best practices to follow. What is a written agreement? At face value, it is simply a customer relationship management document that outlines how a bank will honor and execute customer requests to transfer funds electronically. Below the surface, however, it is a critical component of a bank’s risk management program, with important operational and insurance coverage ramifications. A written agreement authorizes a bank to rely on email, voice, online or fax instructions from a customer to transfer funds. It should be in place for both retail Yes, I know, another article regarding wire fraud. With the large number of wire transfer fraud claims that our agency has helped client banks deal with, I think I should keep sounding this alarm. This article, from my friends at ABA Insurance Services, explains the importance of banks having a written 'LYGO 1EKKEVH President/CEO IBA Insurance Solutions cmaggard@inbankersins.com IBA Insurance Solutions is a Preferred Service Provider and subsidiary of the Indiana Bankers Association. and commercial customers, and should include the customer’s explicit authorization for the bank to transfer funds. Additionally, the agreement should include the names of the people who are authorized to initiate transfers or validate transfer instructions. Be sure to include contact phone numbers and titles, if applicable, of everyone who is granted authority. The written agreement also needs to outline a commercially reasonable procedure that will be utilized by the bank to authenticate all requests. A phone call to a predetermined number is still one of the best ways to prevent fraud. When a callback is not practical, use an out-of-band verification procedure, such as a numerical code sent via text message to the customer’s phone number of record. In all cases, make sure the verification method is clearly spelled out in the written agreement. Finally, it is suggested the written agreement explicitly state the bank will not act upon an instruction if: % The bank is unable to obtain proper and satisfactory verification of the instructions; or % There is inconsistency between such instructions and information previously supplied to the bank by the customer; or % Instructions are not submitted in accordance with security procedures established by the bank; or funds transfer agreement in place with their customers that utilize wire services. If you’d like for us to review your bank’s wire transfer protocols, and ensure they line up with what is expected in your financial institution bond, just give us a shout or shoot us an email. We’d be happy to take a look.
RkJQdWJsaXNoZXIy MTg3NDExNQ==