FINRA Issues Member Alert Regarding ACATS Fraud
The Financial Industry Regulatory Authority released a regulatory notice alerting firms that there’s a rise of fraudulent transfer of customer accounts through the Automated Customer Account Transfer Service.
The Financial Industry Regulatory Authority released a regulatory notice alerting firms of a rise in fraudulent transfer of customer accounts through the Automated Customer Account Transfer Service, an automated system administered by the National Securities Clearing Corporation that facilitates the transfer of customer account assets from one firm to another.
The notice warns that bad actors effect fraudulent transfers of customer accounts using ACATS and lists several existing regulatory obligations that may apply in connection with ACATS fraud.
ACATS fraud usually occurs by a bad actor using the stolen identity of a legitimate customer from a carrying member. The bad actor will open a brokerage account online using a legitimate customer at the receiving member to create a new account using stolen or false information.
After opening the new account, they will initiate a transfer through ACATS from the legitimate customer’s account assets. They will attempt to move the assets to an external account at another financial institution by transferring the account assets, liquidating the securities or a portion of the securities transferred into the new account or purchasing additional securities using the transferred cash and then transferring those securities.
In the notice, FINRA also provided various methods for reporting the fraud.
