FINRA Cautions Investors On Recent Scams

CW
Cadwalader, Wickersham & Taft LLP

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Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
FINRA cautioned investors to be aware of scams perpetrated during the COVID-19 pandemic.
United States Finance and Banking

FINRA cautioned investors to be aware of scams perpetrated during the COVID-19 pandemic.

In a new Notice to broker-dealers, FINRA advised firms "to take appropriate measures to address the increased risks and challenges presented during the COVID-19 pandemic." FINRA identified the following scams:

  • Fraudulent Account Openings and Money Transfers. FINRA warned of an increased number of fraudulent account openings, and highlighted several tactics fraudsters may use when opening such accounts. These tactics include (i) using stolen or synthetic customer identity information, (ii) transferring or diverting funds from a customer's account to the fraudster's account and (iii) rapidly removing these stolen funds from the brokerage account. FINRA recommended that investors consistently monitor their accounts for any suspicious activity, which may occur in smaller, less detectable money transfers.
  • Firm Imposter Scams. FINRA cautioned that fraudsters may take advantage of increased remote work arrangements by claiming to be a broker-dealer via telephone or creating a fake online presence. FINRA stated that fraudsters may try to avoid detection by asking investors not to contact their firm by phone due to long wait times during COVID-19. To avoid these "imposter" scams, FINRA encouraged investors to (i) independently verify a firm's contact information, (ii) keep their personal account credentials private and (iii) deny callers remote access to their personal devices.
  • IT Help Desk Scams. FINRA warned against "social engineering attacks," in which fraudsters claim to represent a financial firm's IT Help Desk in an attempt to steal personal information from the firm's customers. FINRA recommended that investors not provide personal or password information via phone or e-mail unless the caller's or sender's identity can be verified, and by not opening any links, attachments, or downloads from unverified sources.
  • Business E-mail Compromise Schemes. FINRA highlighted schemes that involve fraudsters who are able to execute legitimate funds transfers. FINRA urged investors to independently confirm any requested fund transfers via telephone and to view any deviations from standard payment practices as red flags.

FINRA also advised investors to report scams and potential fraud to their financial firms, FINRA, the SEC and other regulators.

Originally published May 12, 2020.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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