FINRA Cautions Members of Fraudulent Account Transfer Requests in ACATS

FINRA warned its members to use caution when transferring a customer account to another firm through the National Securities Clearing Corporation's Automated Customer Account Transfer Service ("ACATS") due to an increase in fraudulent transfer requests.

In a Regulatory Notice, FINRA said that bad actors are using stolen personal information to request fraudulent transfers and empty customer accounts. FINRA said that the rise is partially due to increased use of mobile brokerage apps. FINRA explained that bad actors (i) have been opening fraudulent accounts using stolen credentials to "divert congressional stimulus funds, unemployment payments or to engage in automated clearing house fraud," and (ii) use stolen credentials to transfer a legitimate customer's assets into fraudulent accounts on another brokerage established using the stolen credentials. FINRA members are being encouraged to follow know-your-customer and account information requirements to prevent fraud.

FINRA reminded firms of obligations under FINRA Rule 2090 ("Know Your Customer"), Rule 3310 ("Anti-Money Laundering Compliance Program"), Rule 4512 ("Customer Account Information"), Rule 11870 ("Customer Account Transfer Contracts") and Regulation S-ID ("Identity Theft Red Flags"). FINRA also urged member firms to report suspected fraud directly, either through FINRA's BSA e-Filing system or by using the tip line of the appropriate federal regulator.