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Covering your assets

Protecting yourself from financial fraud ... and that

pesky Nigerian prince

Covering your assets

John Lund / Sam Diephuis / Blend Images / Getty Images

Identity theft and identity fraud have become one of the fastest growing and most pervasive crimes in the United States. During 2012, approximately 15 million individuals in the US had their identities used fraudulently, resulting in financial losses exceeding $50 billion. And the threat is ever-increasing as the methods thieves use to obtain personal information grow more and more sophisticated.

Traditionally, petty thieves accessed personal information by stealing a wallet or mail or by “dumpster diving.” Today, identity theft is increasingly driven by organized crime using sophisticated techniques such as “skimming” (stealing credit card numbers by using illegally installed readers on credit card processing machines), hacking into corporate databases, and “phishing” email scams.

An ounce of prevention

Identity fraud is often narrow in scope. Many readers of this article have probably received “the call” from their credit card company (usually at the most inopportune time) alerting them to a $2,500 purchase at a Wal-Mart 3,000 miles from home. Fortunately, due to federal credit laws, most of these situations result in some hassle but no out-of-pocket cost to the victim. More sophisticated identity theft, however, can result in large financial losses, damage to one’s credit rating, and many hours (and lawyers’ fees) spent recovering.

While no one can control all of their financial information (e.g., information stored in corporate or government databases), there are many simple steps you can take to limit access to personal information, thus reducing the chance of having sensitive information stolen and misused.

Identity theft and identity fraud are terms used to encompass crimes in which someone wrongfully obtains key pieces of another person’s personal identifying information, such as Social Security number, driver’s license, or bank or credit card account information, and uses the information for their financial gain.

"Phishing" is the practice of attempting to fraudulently gather private financial information via email. The criminal creates an email that looks like a legitimate email from a financial institution (e.g., using the company’s logo and color scheme) and sends it to millions of email addresses, hoping to snare a few unsuspecting victims.

Get online without putting your money on-the-line

In recent years, the internet has become a fruitful and low-risk place for criminals to obtain personal information by exploiting weaknesses in corporate, government and individual computer security, and through a variety of scams directed at tricking people into revealing personal data. The pervasiveness of social media and mobile computing has opened up many more opportunities than existed even five years ago, and criminals are becoming increasingly sophisticated and effective.

Beware of the Nigerian Prince!

Many readers have, at one time or another, been offered a share of the fortune of an unfortunate Nigerian prince who has millions of dollars in gold locked away, and who needs a mere $10,000 from you to help him claim it. Contrary to popular belief, this scam didn’t arise along with the internet; rather, it’s a modern variation on the Spanish Prisoner scam, which dates back to the late 19th century. In that scam, the perpetrator contacted businessmen, claiming to have a wealthy friend in a Spanish jail. He just needed a little money to bribe the guards to release his friend at which time, of course, the grateful friend would repay the businessman’s generosity in spades.

Of course, in those days the perpetrator had to write letters and send them via regular mail, so the cost was considerably higher than now. Yet enough people fell for it to make it worthwhile…some things never change!

Playing our part

Consumers are not the only ones targeted for financial fraud. Increasingly, criminals are directly targeting financial institutions. Charles Schwab reports a fourfold increase in fraudulent wire requests over the last year! Schwab and other investment custodians have a series of verification processes, including signature matching and verification phone calls, to catch these fraudulent requests.

Aspiriant, too, has received a number of email requests from “clients” (usually overseas and in need of funds right away) whose email accounts were hacked. To combat this, we’ve recently enhanced our wire verification processes to require verbal verification of any third party wire transfers. Although this can at times be a little cumbersome, it can mean the difference between becoming the victim of financial identify theft and not.

Of course, part of our job requires sharing sensitive information (e.g., investment account data) with tax preparers and attorneys and, of course, with you. We take care to send anything with account numbers or Social Security numbers via encrypted email. This practice complies with the most restrictive state laws that apply to financial institutions for emailing sensitive data. We encourage clients, and their other advisors, to use Aspiriant’s secure email system for sending information securely to us as well.

Despite the best laid plans…

Short of living “off the grid,” it’s virtually impossible to completely secure your personal information. The steps above will dramatically reduce your risk, in part because the presence of a secure firewall or locked mailbox is enough to cause many thieves to simply move on to the next potential victim. Inevitably, though, virtually everyone will experience some form of financial fraud at some point. When that happens, immediately alert the affected financial institutions and file a police report to limit further damage; after that, call Aspiriant so we can help you think though additional steps to take…depending on the nature of the fraud, this could include possibly placing fraud alerts on your credit reports and opening new credit and brokerage accounts.

Hopefully, with the simple practices outlined here, that will be a call you never need to make.

Alec Manoukian
Director - Information Technology

Ginny King, JD
Director - Wealth Management, Principal

1Bureau of Labor Statistics, Change in Total Nonfarm Payroll Employment (June 2014).

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