High profile? High net-worth? You’re at Special Risk for Fraud

In challenging times, SVB reaches out to our clients when we have helpful information to share. There are some new fraud risks we think you should know about.

Increased Risk of Fraud Attempts

If you're in a prominent role in a high-profile industry, or if you have a liquid net worth greater than $1 million, you and your family may be uniquely targeted for fraud schemes. As we experience the spread of coronavirus, that risk is even greater as fraudsters may take advantage of the uncertainty by increasing the frequency of their attempts or in developing new schemes. Using an abundance of caution is key for everyone, but especially for high net-worth individuals and their families.

The wealthy often have a risky combination of high liquid assets and increased social media exposure, which makes them an attractive target. Recent Javelin Research shows that cyber criminals stole the identities of 6.4% of the general public, but that number jumped to 8.1% for high net-worth individuals of $1 million or greater. The affluent are 43% more likely to experience identity theft, as described in a joint study by Experian and the Department of Justice.

Successful con artists start by learning as much as possible about you, your family, and your business. Jared Feldman, a partner at the accounting firm Anchin, Block & Anchin, notes that a name, an address and a simple email password can be all a hacker needs to gain full access to a high net-worth individual's online accounts via a type of targeted personalized phishing called spear phishing. Incidents of spear phishing have increased 250% as of 2018 (Industry Week) and are estimated to be 80% successful.

Exploiting the latest coronavirus news and developments

During turbulent times, fraudsters leverage recent news and developments to scam investors out of money. The SEC reports a growing awareness of internet promotions or “research reports” claiming that certain products or services of publicly traded companies can prevent, detect, or cure coronavirus and that stock in those companies will dramatically increase value to a specific “target price.” Private investors are urged to be wary of such promotions, and consumers should be wary of purchasing these “miracle” products.

Additionally, a rising number of fraudulent emails are being sent as official communications from health authorities such as the Centers for Disease Control and Prevention and the World Health Organization. These emails include attachments or web links that claim to provide important updates but instead infect devices with malware, which can expose the recipient to a variety of fraud attempts.

Areas of vulnerability for high net-worth consumers (HNW)

Lax social media security and a wider circle of contacts among the wealthy can create high risk exposure for identity theft (the Street). Fraudsters attempt to manipulate their targets into divulging personal information, so wealthy individuals must be especially vigilant about social media use. Children tend to share personal and family information more broadly than most adults, so it’s important to consider their online practices, too.

High net-worth individuals may also be more susceptible to wire fraud. Because they are likely to move money more often, more quickly, and in larger amounts, wealthy families may not detect a fraudulent transfer among their normal activity until the money is long gone.

Credit card fraud is also more prevalent among the HNW. A recent study published by Wealth & Estate Planning showed more than half of high net-worth clients reported they were victimized by credit card fraud.

Real estate transaction fraud is another significant area of risk for the wealthy because a large down payment can reach six or seven figures. A 2018 FBI Public Service Alert reported that [bad actors]… "have heavily targeted the real estate sector in recent years. Victims participating at all levels of a real estate transaction have reported incidents, [such as]… title companies, law firms, real estate agents, buyers and sellers. Victims most often report a spoofed e-mail being sent or received on behalf of one of these real estate transaction participants with instructions to change the payment type and/or payment location to a fraudulent account." Real estate transactions are notorious for electronic signatures, numerous email exchanges of sensitive documents, and a variety of interactions with unfamiliar contacts. You should verify all money transfer instructions by phone or in person and ask to receive a verifying email before sending funds or sensitive account or identity data.

Six fraud prevention tactics for high-risk families

In addition to standard information security strategies that everyone should follow, such as securing your home network, using strong passwords, and using anti-malware programs, wealthy families should consider the following tactics:

1. Train yourself and your financial contacts to respond cautiously to urgent requests

Criminals create a sense of false urgency to confuse their victims into skipping fraud prevention measures. Train yourself and educate your financial contacts – relationship managers, tax advisors, insurance brokers, financial advisors, and family office personnel – to be suspicious of any last-minute email requests for financial transactions. Avoid making rushed, unrealistic demands in your financial dealings, and allow time for all involved to follow security procedures to prevent transactions from going unverified. Insist that your financial contacts verify your transaction requests using a second method, i.e., calling you directly, to confirm that the request is legitimate.

2. Educate family members on data sharing precautions, especially children

It's critical to educate your family members about how their digital decisions affect your family's financial security. Today, more than 20% of all Facebook accounts are registered to minors. Cyber stalkers can expertly coax children on social media to share personal information that is later sold or used to victimize the family. Parents must be vigilant, and they may need to monitor their children's online behavior to ensure sensitive information isn't shared.

3. Find and stop impersonators on social media

Fraudsters build fake identities to gather data, so it’s critical to locate and stop social media impersonation. Verify a friend request before accepting it, and never accept a sharing request from a stranger. You may consider hiring a professional service to monitor social media channels to take down fraudulent posts or accounts.

4. Segregate family and business accounts and online communications

Business Email Compromise via personal spear phishing can happen to anyone. Recently, an executive became a victim after the fraudster first hacked the executive's wife's personal email account. When she emailed a photo of their son's soccer game to his work email, the hacker intercepted it and embedded it with malware, knowing the executive would trust the source.

Targeting and hacking family members' accounts to add malicious code to gain control of a business account is an increasingly common tactic for fraudsters. Once inside the business account, the fraudster can send messages (that seem to be from you) asking vendors to send funds to fraudulent accounts or asking bankers to wire funds to fraudulent accounts.

To prevent this type of spear phishing, it's a good idea to separate family and business online communications completely. Check that an email address hasn't changed in the "to" and "from" lines, which may indicate a phishing attempt. For entrepreneurs whose business and personal communications have been commingled for years, this separation may be challenging. But segregating communications is like segregating financial duties; it provides one more barrier to help lock out malware and prevent potential cybercrime.

5. Consider digital tools

As your wealth grows, so may your number of online accounts to manage. Remembering complex, alphanumeric, and unique passcodes for numerous online accounts can be daunting, but recycling or writing them down can be unsecure. Password manager services provide a secure way to store family security data in an encrypted database. This allows each family member to use stronger, more complicated and unique passcodes to help keep your accounts secure. In addition, using a digital wallet to make purchases in a store or online encrypts the payment data, so fraudsters can’t use it even if it’s stolen. Many digital wallets also provide a tap and go experience, limiting the amount of contact with the card reader to reduce health implications.

6. Don't go it alone – consider using a security consultant

Many well-established family office firms provide packaged security risk management services to their high net worth clients. These professional firms can build a custom fraud prevention strategy that integrates cybersecurity into wealthy client lifestyles. If you feel you have high risk of exposure, you should also consider purchasing identity protection.

Please speak with your SVB Relationship Manager if you would like to discuss your personal financial needs with us and take steps to protect yourself and your family. If you have a high-profile role, are wealthy or are newly wealthy, you may be at an increased risk for fraud. Take some key steps to ensure no one else is celebrating your good fortune along with you and your family.

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This article was previously posted on February 14, 2019 and updated on May 5, 2020.
©SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of the FDIC and of the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB). SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license.

This material is provided for informational purposes only. The conclusions expressed are based upon limited information available to Silicon Valley Bank regarding your company's fraud detection and prevention programs, and should not be seen as a substitute for obtaining your own independent assessment of such programs. The security of your operating system and your procedures for conducting banking transactions with us remains your responsibility. Silicon Valley Bank is not responsible for any cost, claim or loss associated with your use of this material.   

About the Author

Rob is SVB's Deputy Bank Secrecy Act (BSA) Officer, responsible for fraud and anti-money laundering investigations. He has spent more than 20 years in banking focused on risk management, information technology, and decision science. Prior to joining SVB, Rob served as the manager of operations for Financial Crimes Investigations with Wells Fargo Bank.