Protect Your Brokerage Accounts from ACATS Fraud

[Gotadimple]

A new blog post by Harry Sit discusses ACATS fraud.
[MOD DELETE - BAD LINK]

A member of Bogleheads reports seeing his account shares being transferred out after he received dividend payments. ACATS is Automated Customer Accounts Transfer Service and is used to move investments between brokers. Recently a weakness has been exposed that lets a non-owner of the brokerage account initiate a transfer out of shares by setting up an account in the real owners name at another broker site with personal data from the dark web and lack of confirming email/snail mail from the new broker to the owner.

He discusses the weak points and how to secure accounts to prevent this from happening.

 

[audreyh1]

The above link is sending me to UPS!

Protect Your Brokerage Accounts From ACATS Transfer Fraud

Fraudulent brokerage account transfers via ACATS are rare but devastating. Learn how to protect your accounts from ACATS fraud in this case study.

thefinancebuff.com

 

[SecondCor521]

Ironically the link in your OP leads me to a UPS tracking page, not the URL shown in the text.

ETA: Reported post to mods to fix. Not casting aspersions at anyone and the actual hyperlink is probably harmless, but who knows these days.

ETA2: Here's the real link (as if anyone should trust me - hover over it before clicking): Protect Your Brokerage Accounts From ACATS Transfer Fraud

 

[pb4uski]

That's scary. I have used ACATS occasionally when moving accounts.

Since I update Quicken every few days, any transfer would show up there but it might still be too late.

 

[SecondCor521]

On the topic, I do review my own financial accounts several times a week and my Dads' accounts several times a month. Vanguard has a nice "activity" page where I can review transactions by account over the past month and would notice anything untoward at least within a few days or a week or two.

 

[jim584672]

Regulatory Notice 23-06

FINRA Shares Effective Practices to Address Risks of Fraudulent Transfers of Accounts Through ACATS​

Published Date: March 28, 2023

Regulatory Notice 23-06 | FINRA.org

Summary To bring attention to a rising trend in the fraudulent transfer of customer accounts through the Automated Customer Account Transfer Service (ACATS), FINRA issued Regulatory Notice 22-21, which alerted member firms about how bad actors effect fraudulent transfers of customer assets using...

www.finra.org

 

[audreyh1]

Didn’t know about the turn off feature at Fidelity. I may set that up on the main account.

Good article.

 

[socca]

Good advice. I've been a little lax about sharing my VG brokerage account numbers with financial pros. At least it's no longer necessary to enter a VG brokerage account number into TurboTax to import a 1099.

 

[Koolau]

Good advice. I've been a little lax about sharing my VG brokerage account numbers with financial pros. At least it's no longer necessary to enter a VG brokerage account number into TurboTax to import a 1099.

I didn't know about ACATS. I can't think of why I would use it. Within Vanguard, if I move funds, is ACATS involved?

Thanks.

 

[jim584672]

I didn't know about ACATS. I can't think of why I would use it. Within Vanguard, if I move funds, is ACATS involved?

Thanks.

ACATS is to move your stock positions from one Broker to another.

 

[TheWizard]

I didn't know about ACATS. I can't think of why I would use it. Within Vanguard, if I move funds, is ACATS involved?

Thanks.

No.

 

[Koolau]

ACATS is to move your stock positions from one Broker to another.

Did that once, many moons ago. Didn't use ACATS that I know of (from 401(k) to V.).

 

[jim584672]

Did that once, many moons ago. Didn't use ACATS that I know of (from 401(k) to V.).

If you moved stock positions it had to use ACATS.

 

[mn54]

Didn’t know about the turn off feature at Fidelity. I may set that up on the main account.

Good article.

Is the "turn off" feature the same as the security lockdown on an account? before being able to do any type of transfer the lockdown must be turned off.

 

[Koolau]

If you moved stock positions it had to use ACATS.

Now that I think of its, I actually donated some stock as well, moving from the 401(k) to a charity.

That is scary.

 

[audreyh1]

Is the "turn off" feature the same as the security lockdown on an account? before being able to do any type of transfer the lockdown must be turned off.

Yes - Lockdown rejects all ACATS transfers when on. From the article:

Enable Lockdown​

Fidelity is the only broker I know that offers an optional Money Transfer Lockdown feature. It doesn’t stop all the ways money can go out of an account but a partial lockdown is better than no lockdown. Fidelity will reject all ACATS transfers when you turn on this setting on an account.

Enabling the lockdown also stops some legit transfers you initiate. You’ll have to disable the lockdown, do your transfer, and re-enable the lockdown. It’s a tradeoff between convenience and protection.

 

[joesxm3]

The Fide!it lockdown is no big deal. Leave it on all the time and just go to profile security and turn it off before you do ACH or move between accounts or to charitable gift fund. Once you schedule the transfer you can go turn it back on right away. No trouble at all. You can get texts when it goes on or off to alert you.

 

[audreyh1]

The Fide!it lockdown is no big deal. Leave it on all the time and just go to profile security and turn it off before you do ACH or move between accounts or to charitable gift fund. Once you schedule the transfer you can go turn it back on right away. No trouble at all. You can get texts when it goes on or off to alert you.

Yeah, I figured. My main account I do transfers once a year, so that’s straightforward. The other accounts just hold money market funds and sometimes short-term CDs or T-bills.

 

[MTB4me]

I've been using security lockdown for a couple of years now in Fidelity. And also have transaction notices, and security lockdown changes, sent to both e-mail and text. It's just good security hygiene. It takes just a few seconds to turn it off and back on again when I need to do a transfer. Can't be too careful these days.

 

[Flieger]

The Fide!it lockdown is no big deal. Leave it on all the time and just go to profile security and turn it off before you do ACH or move between accounts or to charitable gift fund. Once you schedule the transfer you can go turn it back on right away. No trouble at all. You can get texts when it goes on or off to alert you.

What if you’ve set up a recurring “paycheck” from your IRA to checking account in retirement? Seems it would block that as well?

Flieger

 

[joesxm3]

No the recurring transfers just need it unlocked when you set them up but it can be locked when the subsequent transfers occur.

 

[tulak]

The only downside with Fidelity is you have to disable/enable money lockdown when transfer money between Fidelity accounts. But I have it enabled for all my accounts. I’d rather deal with the occasional disable/enable than fraudulent withdrawals.

 

[Koolau]

The only downside with Fidelity is you have to disable/enable money lockdown when transfer money between Fidelity accounts. But I have it enabled for all my accounts. I’d rather deal with the occasional disable/enable than fraudulent withdrawals.

Now that the issue is known, aren't there ways to prevent fraudulent transfers (maybe 2 separate verifications)?

 

[donheff]

I have wondered the same about bank pulls. It seems like anyone with your account number and routing number can pull money. Thos numbers are printed on checks.

 

[Flieger]

When we consolidated to Fidelity from other retirement accounts, we did direct (brokerage to brokerage) but through check mailed to Fidelity.

Flieger