Financial Fraud is on the Rise

| December 5, 2013 | 0 Comments

Recently, financial companies have seen a marked increase in the incidence and sophistication of financial fraud, especially through email. Charles Schwab has informed us that industry-wide attempts at financial fraud have increased more than ten-fold over the past five years from 30,000 per year to more than 300,000. At a recent meeting with other financial advisors, half of those in the room said they had seen at least one fraudulent attempt to access their clients’ accounts.

By now, most of us have heard some kind of story about a friend’s email being hacked. My favorite was a friend who was sitting next to his wife checking email, and received an email from her address saying she was stuck in London on an emergency trip. He asked her how the trip was going, receiving a blank and confused stare in return. The point of these scams was to start an email conversation with the victim’s friends who would send money to “help.”

While I still see these kinds of things once in a while, what has apparently become more common is for fraudsters to hack into email accounts and then monitor them for a while. They try to gain a sense of how their victim writes and who they correspond with. They could learn about your close friends, family members and advisors. They would see bank and brokerage account notices, so they would know which financial institutions you use, or see purchase confirmations for online shopping.

Recently, we received an email from a client’s email address asking about a wire transfer, and “to advice [sic] her of her account balances.” Knowing our client, this was pretty easy to spot as forgery and we called the client to discuss it, but it is a sample of the kinds of things that are becoming more common.
As scary as this sounds, there are two points that I want you to remember:
1. People who bank online are more likely to discover financial fraud early, and
2. Electronic delivery of statements is still considered safer than paper delivery because it is so easy to lift paper statements out of most mailboxes.

But you do need to take precautions.

Keep your AntiVirus and Malware software up to date. Viruses are EVERYWHERE, and children and teenagers seem to be especially adept at finding them as they surf the web looking for new, free tools for their electronic gear or homework. Schedule scans of your computers often and keep your virus definitions up to date. American Banker recently listed key-logging malware (which records your keystrokes and send them to hackers) as one of the greatest risks to banks and their customers. These kinds of malware (bad software) will record the things you type, like “” Regularly scanning for viruses will greatly reduce this kind of risk, but use a recognized antivirus program, not a free online utility.

Make sure your passwords are strong. Your spouse’s initials and birth year simply aren’t good enough. A strong password should combine at least three of four elements: upper case letters, lower case letters, numbers and symbols (@, #, $, %, etc). In addition, you can combine these with a simple phrase, so that “easy to remember” becomes “EaSy_2_ReMeMbEr.” I wrote an article on this topic for the June 2012 Sentinel, so please feel free to email me for a copy of that article, or check the archives at

When you are banking online, don’t surf to other websites. When you have multiple browser windows open, some websites can run scripts that can access your other browser windows. This is called “cross-site scripting”. This is a relatively rare risk, but if your bank’s software is vulnerable to this kind of attack, when you have a banking session open in one window, a hacker could potentially access your bank accounts that way. It’s easy enough to prevent by doing your banking with no other browser windows open and closing your browser when you’re done.

If you have any concerns about your financial security online, talk to your bank or financial advisors about the security of their online tools.

This column is prepared by Rick Brooks, CFA, CFP®. Brooks is Vice President for Investment Management with Blankinship & Foster, LLC, a wealth advisory firm specializing in comprehensive financial planning and investment management. Rick can be reached at (858) 755-5166, or by email at Rick and his family live in Mission Hills.

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