FINRA warned member firms of an increase in new online brokerage accounts engaged in fraudulent Automated Clearing House ("ACH") "instant funds" transactions.
FINRA observed an increased prevalence of bad actors opening online accounts, using potentially stolen information, and then requesting that a firm pull funds from a linked bank account (or an ACH transfer) while quickly using the "instant funds" offered by the firm to purchase securities. According to the FINRA Notice, following the execution of the orders, the firm receives either fraud or insufficient funds messages from the bank that was supposed to send the funds, leading to losses for the firm.
FINRA recommended that firms assess the potential financial risks they may face as a result of the increase in "instant funds" abuse and take action to mitigate such risks, such as (i) adjusting the amount of "instant funds" available to a new customer, (ii) delaying new customers' ability to use "instant funds" and (iii) bolstering new account validation procedures. FINRA stated that firms should also consider whether any "instant funds" abuse the firm may have experienced could trigger the requirement to file a Suspicious Activity Report (or "SAR").
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