Don’t Get “Shorted” on Wire Transfers
The past few months have seen a rise in fraudulent Wire Transfer attempts and/or forged or fraudulent foreign check cashing. With the implementation of good procedures and the use of good old common sense, you should be able to avoid most, if not all, of these types of losses. While your first line of defense for loss reimbursement would be the Financial Institution Bond, there are several conditions within this bond that must be met in order for coverage to apply. Here are some procedures to implement to prevent a loss, and make sure, that should you have a loss, the Bond will cover it.
First and foremost, use some common sense. If you have a customer that either has a check from or wants to wire cash to a bank in China, India, Nigeria, or somewhere in South America, alarm bells should go off. If the action requires immediate attention, the red lights should go off with the alarms! Yes, there is a chance that these transactions might be legitimate, but the odds are that this is some sort of scam. Your customer is probably a victim here, so tread lightly, but firmly. Take your time. Be sure the transfer request is legitimate and/or the check is legitimate, and that the funds are available for transfer.
Second, if it is a wire transfer request, be sure you have a Wire Transfer Agreement in place with your “true” customer. While Wire Transfer Agreements executed by Fax or E-mail are covered, there is a high risk that the Agreement will be forged or made with someone falsely representing your customer. I would recommend that you have ALL wire transfer agreements executed “in person” on bank premises. At the same time, you should give the customer their “PIN” number and find out what phone number you should use for “Callbacks”. Extreme care should be used in the transference of this information between parties. It would probably be a good idea to have a “waiting period” of 10 days to 2 weeks after the signing of the Wire Transfer Agreement before funds are allowed to be transferred. Remember, if you do not have an agreement for Wire Transfers with your “true customer”, there will be no coverage should a loss occur.
For goodness sakes, comply with the Callback procedures described in your Financial Institution Bond. The Callback amount will usually be the Bond deductible. For example, if your deductible is $50,000, your Callback amount will probably be $50,000. This means that you MUST call your customer back at the prearranged number to confirm any wire transfer request in the amount of $50,000 or more. This must be done for EVERY wire transfer request, even if there are multiple requests on the same day. Should you not make a Callback, and a loss occurs on that particular Wire Transfer, your Bond carrier will deny coverage, even if it would have otherwise been covered.
These steps should be presented to the customer in the light of THEIR best interest, which indeed it is. The criminals are out there folks, and they are looking for ways to get to this area of banking. With some common sense, and some reasonable bank policies on Wire Transfers, communicated clearly to your front line people, serious losses in this area can be avoided, and when they do happen, covered by your Financial Institution Bond.