Cybercriminals are perfecting their methods of taking over customer accounts, officials at the Financial Industry Regulatory Authority warned at its annual conference yesterday.
Finra has received an increasing number of reports about account takeover incidents, said agency representatives in a panel discussion at the conference and in a new notice designed to provide broker-dealers with practices to prevent and detect such attacks.
Account takeovers involve bad actors using compromised customer information, such as customers’ log-in credentials, to gain unauthorized entry to their online brokerage accounts.
The methods of attack include phishing emails, fake websites, cell phone apps and fraudsters calling customers pretending to be registered reps from the customers’ firms to acquire personal information.
Scam artists “aren’t just asking for usernames and log-ins, but are taking a more aggressive approach,” said Bob Colby, Finra’s chief legal officer, at the conference. “Once you pick up the phone or click on a link, they ask for names, phone numbers and your mother’s maiden names to mirror real interactions. They’re being super aggressive,” Colby said.
Finra is also seeing instances where firms think their reps are “trading away” or doing business that is not approved or supervised by the broker-dealers. “If you think that your rep may be trading away, it is more often than not a website or communication that your rep is not even aware of,” Colby warned.
The large number of stolen customer log-in credentials available for sale on the “dark web” and the emergence of more sophisticated technology that allows fraudsters to automate large-scale account takeovers may be driving the increase in these attacks. Criminals are also using mobile device emulators to access thousands of online brokerage accounts and have begun using synthetic identities to fraudulently open new accounts.
Firms need to “be proactive,” Colby said. “Explain to clients in advance that these are the scams being used and that you’d never ask them for sensitive data via email or the devices they use.”
The chance investors will be defrauded by such schemes is reduced 80% if they’ve been shown examples of the fraud, said Bari Havlik executive vice president of Finra Member Supervision, at the conference.
To help firms fight account takeover fraud, Finra officials recently met with representatives from 20 broker-dealers to glean their methods of preventing, detecting and responding to these attacks.