FINRA is Alerting Firms about Automated Customer Account Transfer Service fraud

According to a special notice issued by the Financial Industry Regulatory Authority (FINRA), the regulator is alerting brokerage firms about a rising trend in the fraudulent transfer of customer accounts through the Automated Customer Account Transfer Service (ACATS), an automated system administered by the National Securities Clearing Corporation (NSCC), that facilitates the transfer of customer account assets from one firm to another. 

According to FINRA, in a situation where customer account information is stolen, a fraudster may use this information to effect ACATS fraud. In general, ACATS fraud could happen like this: 

Using the stolen identity of a legitimate customer of a carrying member, a fraudster will open a brokerage account online or through a mobile app in the name of the legitimate customer at the receiving member to create a new account. The fraudster may open the new account solely using stolen information or with a combination of stolen and false information (for example, false email address or phone number). 

After opening the new account at the receiving member—generally, within a few days or weeks—the fraudster will then provide the receiving member with a TIF to initiate a transfer through ACATS of the legitimate customer’s account assets from the carrying member. 

Once the ACATS transfer of the assets to the newly established account at the receiving member is completed, the fraudster will attempt to move the stolen money to an external account at another financial institution. 

ACATS fraud is connected to the growing threat of new accounts being opened online or through mobile apps using stolen or synthetic identities, according to the FINRA alert. In connection with the COVID-19 pandemic, FINRA previously advised member firms that bad actors may be “targeting firms offering online account opening services and perhaps especially, firms that recently started offering such services” by using stolen or synthetic identities to establish new accounts at member firms as a way to “divert congressional stimulus funds, unemployment payments or to engage in automated clearing house (ACH) fraud.”  

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The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington. 

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