Cybersecurity and Fraud

by Laura Hall, CIMA®, AIF®, Senior Portfolio Manager/Director of Client Services, REDW Stanley Financial Advisors

From Capital Conversations (Spring 2018)View Newsletter

Protecting your personal and private financial information is critical and important to your financial health. There are serious threats out there, but there are also practical steps you can take to safeguard your identity and assets. By following the guidelines below and being careful when sharing any kind of personal and private financial information in online transactions, you can minimize your chance of falling victim to some form of cyber-crime.

Tips for Working with REDW Stanley

  • Keep your REDW Stanley Relationship Manager up to date on any changes in your financial life or your personal information.
  • Expect that your Relationship Manager will call you to follow up on an email or voice mail request to wire money, execute an unexpected trade or change your account information.
  • Expect that, if your Relationship Manager is out of the office and it’s necessary to talk to an REDW Stanley professional who does not know you, you will need to verify your identity before any transaction can be executed, even if you are the one requesting the transaction.

What You Can Do

  • Use two-factor authentication, if available, to add one more layer of protection to your financial assets. Consider using a password manager to help with this process.
  • Be aware of suspicious phone calls, emails or texts asking you to transfer money or disclose personal or private financial information. If someone identifying themselves as a representative of a reputable company contacts you with a suspicious request, hang up and call the phone number you have for that company.
  • Do not share personal and private financial information or conduct business via unsecured email, as those accounts can be accessed or corrupted. If you must share personal and private financial information via email, send it using a secure method. If a secure method is not available, find another way to share the information.
  • Delete an email if you do not know or recognize the sender.
  • Do not open or click on links or attachments from unknown sources.
  • Check your online accounts (banks, credit cards, etc.) regularly for suspicious activity. If you identify a transaction that you did not originate, report it immediately.
  • Do not enter confidential financial or personal information in public areas or on an unsecured Wi-Fi network. Public areas can allow someone to “look over your shoulder,” and an unsecured Wi-Fi network can easily be hacked.
  • Use a personal Wi-Fi hotspot or a virtual private network (VPN).
  • Create strong passwords for each website account and change your passwords regularly. A strong password consists of at least six characters (and the more characters, the stronger the password) that are a combination of letters, numbers and symbols (@, #, $, %, etc.) if allowed.
  • Do not use personal information as part of any login or password protocol.
  • Do not share login credentials.
  • Keep your technology, including your web browser, operating system, antivirus and anti-spyware, up to date and active.
  • Dispose of old hardware safely by performing a factory reset or removing and destroying all data storage devices.
  • Do not use free/found/borrowed/loaned USB devices. They could be infected with malware or a virus.
  • Do not visit websites advertised in pop-ups or ads if you are not familiar with that website.
  • When exiting a website, log out to completely terminate your access.
  • Hover over questionable links to see the URL before clicking on a link. Secure websites begin with “https” not “http”.
  • Limit sharing information on social media sites. Assume fraudsters can see everything, even if you think it is safe. Be cautious when accepting “friend” requests on social media, liking posts or following links.
  • Following these guidelines and best practices and taking these precautions will not guarantee you will avoid having your personal and private information hacked, but it will go a long way to making it more difficult for fraudsters to access important financial data.

The Most Common Investment Frauds

Not to be outdone by the IRS, the Securities and Exchange Commission (SEC) has compiled its own list of the most common types of investment frauds. Beware of:

  • Affinity Fraud: Doug Vaughn perpetrated one of the most notable frauds of this type in the Albuquerque area, while Bernie Madoff was another who garnered national attention. Affinity fraud exploits the trust and friendship that exists in a community, as when someone who is either well known in an investor’s circle of friends or highly recommended by someone the investor trusts implicitly presents an investment that is projected to deliver rates of return higher than any current legitimate asset rate of return. When it sounds too good to be true, in many cases, it is just that.
  • Advance Fee: This fraud presents an investment that is an easy winner, but the investor must pay an upfront fee in order to buy the investment. In order to close the deal, the fraudster will use such words as regulatory fee, finder’s fee or commission to describe the false advance. To avoid this type of fraud, ask for publicly available information about the investment or the company issuing the investment, or about the person who is recommending the investment.
  • Binary Options Fraud: Official sounding, isn’t it? With this type of options contract, the buyer bets on whether an asset price rises or falls within a specific period of time. When the contract expires, the owners receive a predetermined amount of cash or no cash at all. These types of online trading platforms are mostly unregulated, however, and could be engaged in illegal activity. Check the validity of the offer, sale and trading platform through the SEC. Trading in options does exist, but a number of government agencies regulate legitimate options trading.
  • High Yield Investment Programs: This type of fraud appeals to investors who focus solely on the yield projected by the investment. If the yield is higher than what is available on current, legitimate investments or it sounds too good to be true, it probably is.
  • Pre-IPO Scams: Fraudsters offer investors a fake opportunity to buy initial public offerings (IPO) before the company goes public. Can’t do it. Issuing stock by public companies is highly regulated by a number of government agencies.
  • Microcap Fraud: Be suspicious of stock promotions, especially if unsolicited. Microcap fraud is when a fraudster promotes a stock with a very low price (less than $5.00 per the SEC) to accomplish other fraudulent schemes. In one such scheme, “pump and dump,” fraudsters “pump” up the price of a small, unfamiliar company stock and then sell or “dump” their own holdings of said stock, depressing the price of the stock and leaving the unsuspecting investors with a mostly worthless stock.

If you have questions about an investment that sounds like a “really good” deal, contact your Relationship Manager. We can help determine if you should “Just Say No.”

Did you know?

  • Firm section: Registration is now open for a very timely seminar from REDW LLC, in partnership with RiskSense and Blackgarden Law, on “Cyber-Resilience.” This event, the second in a unique series of free seminars for small businesses in the Albuquerque Metro area, playfully dubbed “Biz Tips on Tap,” will be hosted by Nexus Brewery on May 23, 4-6 p.m. To learn more or to register for this fun and educational event, please visit redw.com/events.
  • Economic section: Canada and Mexico were the first- and fourth-largest sources of foreign steel in the U.S. in 2017. According to a Commerce Department study, those countries accounted for one-fourth of all steel imports. The two countries also ranked first and 11th in aluminum imports, comprising 43% of foreign supplies. Source: Wall Street Journal.
  • Client section: One of our clients has written and directed a documentary, The China Hustle, which premiered March 30, 2018. The documentary revisits the reverse-takeover bubble of earlier this century, when hundreds of Chinese companies got instant US listings by merging into public, but declining, US corporations. Many of the Chinese firms were frauds, with fake factories and cooked books. Ultimately, the SEC, reacting to the fraud exposed by hedge fund researchers and other investigations, established a task force that shut down these back door listings. Source: Barron’s

 

Copyright Roy Delgado

Copyright 2018 REDW Stanley Financial Advisors, LLC. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.