Nowhere is digital security more important than in financial transactions. A former head of the RCMP’s commercial crime unit, Bernard Beck today is the chief compliance officer for AscendantFX, a Toronto-based foreign exchange trader that has developed a software platform to detect suspicious transactions. AFX Online, as it’s known, is used by 2,500 regional banks in the U.S.
AscendantFX has detected “romance schemes” (where a bank client is wiring money to a significant other they’ve only met online); cash moving to supposed friends and relatives abroad; a stock scam tied to a brokerage in the Cayman Islands; and a scheme to direct investment funds for a medical marijuana startup that somehow ended up with a construction firm in China with links to people sanctioned by the U.S. Securities Exchange Commission. Beck says AFX could also aid in combatting the growing problem of terrorist financing.
“You’re not going to stop crime,” Beck says. “Criminal organizations are incredibly sophisticated and they are constantly innovating.” And though the onus is on financial institutions to put the necessary controls in place to frustrate them, individuals and businesses are still vulnerable.
Here are Beck’s recommended steps to take to minimize your firm’s risk of falling victim to—or unwittingly abetting—financial fraud:
- Know your clients and the kinds of business they do. That way you’ll recognize when something out of the ordinary happens.
- Monitor transactions for any irregularities. For larger organizations, Beck says, “manual monitoring just doesn’t cut it.”
- When you receive an email for a large or unusual order with instructions, confirm with the client by phone. Always source the phone number independently; don’t just call the number provided in the email.
- Examine all documents such as purchase orders and invoices closely. These can be faked, of course, but a trained eye can catch inconsistencies.
- Ensure all money movements involve multifactor identification, such as a user ID, password, corresponding authorization number and physical key, card or token. Even if you’re going so far as to use an iris scan, it’s the corroborating identification that’s the key barrier to fraud.
- Be wary when a prospective customer approaches you and you alone. “If they’re begging to do business with you, that’s a red flag,” Beck says. “They are insistent and adamant. They push and push. No real client does that.”
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How do you mitigate the risk of financial fraud? Let us know by commenting below.