Sunday 20th April 2014
flextrade
BlackRock has been awarded its first Renminbi Qualified Foreign Institutional Investor (RQFII) licence by the China Securities Regulatory Commission (CSRC) - An index joint venture between FTSE Group and Canada’s TMX Group has acquired the indices business of MTS, a European electronic fixed income trading business owned by the London Stock Exchange - The European leveraged finance market is set to undergo a shift this year, as private equity sponsors veer back towards loans to finance leveraged buyouts, says S&P Capital IQ - Turkish corporates are the most exposed among EMEA emerging markets to a scenario of slowing growth, rising interest rates and a persistently weak local currency, according to Fitch Ratings - London-based Global Markets Exchange Group (GMEX) is in talks to acquire an equity stake in ALTX Africa Group, a new exchange operator focusing on East Africa - Alternative asset managers with expertise in high-yield fixed income and distressed assets are upping their investments in the peer-to-peer loan market, according to a new report from Cerulli Associates.

Blog

Corporate Review

By Partners at BDO

The Rise of Account Switching Fraud

Monday, 06 August 2012 Written by 
The Rise of Account Switching FraudRecently, there has been a rise in businesses falling victim to so called ‘account switching fraud’. The fraud is worryingly simple and, unfortunately, often successful - so how is it done and what can you do to prevent yourself or your company becoming a victim?http://www.ftseglobalmarkets.com/

Recently, there has been a rise in businesses falling victim to so called ‘account switching fraud’. The fraud is worryingly simple and, unfortunately, often successful - so how is it done and what can you do to prevent yourself or your company becoming a victim?

The fraud involves a company being contacted by a purported supplier and informing it that the supplier’s bank account details have changed.  New bank account details are provided and the company then makes payments to this “new” bank account. It is only when the supplier starts chasing for payment of outstanding invoices that the company realises that it has being making payments to a fraudster. The fact that a public body has now been targeted indicates that it is moving from what, up until now, have been corporate victims.

Although the overall technique is similar, the fraudsters use a variety of methods to communicate the change of bank details to the victims and persuade them that they are legitimate.  Real examples have included:

  • The use of an e-mailed letter that purported to be from a Director of the supplier and in which the “new” bank account details are given.
  • Advising the victim of changes to other minor details initially by telephone, thereby building a rapport with the victim’s staff (normally one individual), before advising of the change of bank details. 

So why is this type of fraud so successful and therefore dangerous?  It is common in these circumstances that the fraudster gives the impression of having certain knowledge of the victims operations which are, on the face of it, confidential and thus give the impression of legitimacy. However, in today’s information age there is a considerable amount of information available in the public domain, for example, company websites listing major customers.  However, the key reason that these frauds are successful is usually due to a fundamental lack of, or observance of, basic internal controls. Until such checks and balances are put in place and actively followed this worryingly prevalent crime will continue to be successfully perpetrated.

So how can you prevent you or your organisation from becoming a victim?  The key is to have robust internal controls and that they are reviewed to ensure that:

  • There is limited access and authority levels to change standing data, particularly in relation to cash outflows to the business.
  • Senior personnel authority is required to change data and that reports of any changes made are provided to senior management on a regular and timely basis.
  • Checks are undertaken to verify that instructions to make payments to different bank accounts are bona fide.
  • There are sufficient segregation of duties to reduce the risk of one individual having access to all information to effect such a fraud.

 However, none of these controls are effective unless implemented and enforced.  For those who find this advice has come too late, the key to mitigating the damage from such a scam is to take professional advice and act as quickly as possible. 

Stephen Peters

Stephen Peters has over 15 years of experience in forensic accounting and has been involved in a number of major international financial investigations in various countries including Switzerland, Germany, Albania, Poland and Jamaica. He also has experience in dealing with cases of fraud and has undertaken numerous expert witness assignments in a broad range of areas.

Prior to joining BDO, Stephen was a forensic accounting Director at AlixPartners, a specialist US consultancy firm.  Before working at AlixPartners, he was a Senior Manager with PricewaterhouseCoopers and worked in its Leeds, Norwich and Birmingham offices as part of the forensic services practice where he was involved in major investigations and large-scale litigation assignments.  He also spent three years working for an international firm of Chartered Loss Adjusters dealing with loss of profits and investigating suspected fraudulent insurance claims.

Stephen is an Associate of the Institute of Chartered Accountants in England and Wales, has a BSc degree in civil engineering, and a post-graduate certificate in Fraud Risk management.

Related News

Related Blogs