Wire Transfer Fraud Scams On The Rise - Are You Covered?
One of the largest areas of loss for banks across the Upper Midwest continues to be fraudulent wire transfers that are customer initiated via phone, fax, or email. Unfortunately, some of these claims are not covered due to the bank not following specific requirements in the Financial Institution Bond (FI Bond) policy.

How does your bank avoid this exposure? It all starts with having strong internal policies and procedures including a thorough review of the FI Bond wire transfer requirements. Your FI Bond will only provide coverage if you follow the requirements outlined in your FI Bond Policy, which typically include the following:

  1. A wire transfer agreement in place for all customers that initiate wire transfers via a phone call, e-mail or fax. 
  2. A predetermined PIN or password. Usually the best practice is to have this PIN or password on the wire transfer agreement. Also, the PIN or password should not be easily identifiable.
  3. A call back procedure in place to verify the customer using the predetermined PIN or password. When calling the customer back to verify the funds transfer and authenticate the transaction, the call back needs to be made to the person and phone number on the wire transfer agreement. The call back procedure authentication needs to be documented on a ledger form and initialed or signed verifying that the passcode was authenticated by the bank employee completing the wire request. Some carriers even require a voice recording of the call back procedure. Most policies have requirements to call back the customer on all requests over a specified dollar amount but many banks will call back on all wire transfer requests initiated via phone, fax or e-mail.
A common paid claim scenario is for a fraudster to compromise the bank customer’s phone system and password or PIN resulting in fraud, despite the bank staff following all required procedures. However, we have seen claims denied because there was no written wire transfer agreement on file for the customer, or the call back was made to the fraudster’s number rather than the number on the wire transfer agreement. 

It’s important to spend some time with your FI Bond agent to make sure you understand your carrier’s requirements and to make sure your limits are adequate.
If you are interested in finding out more about MBIS or the products available please contact Jeff Otteson at 608-217-5219 / jeffo@mbisllc.com or Adam Dawson at 952-857-2604 / adamd@mbisllc.com.