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On March 28, 2023, the Financial Industry Regulatory Authority
(FINRA) published Regulatory Notice 23-06 addressing the “recent trend[s] in
the fraudulent transfer of customer accounts through the Automated Customer
Account Transfer Service (ACATS).” ACATS is an automated transfer system
developed by the National Securities Clearing Corporation (NSCC). It allows
eligible participants to automatically initiate, review, and complete the
transfer of customer accounts through standardized procedures. FINRA Rule 11870
(Customer Account Transfer Contracts) governs the account transfer process, establishing
rules that firms must follow when a customer completes a Transfer Instruction
Form (TIF).
FINRA has noticed an increase in the instances of bad actors
taking advantage of the ease of use of ACATS to fraudulently transfer customer
accounts. ACATS fraud often involves a bad actor opening a new brokerage
account online using the stolen personal information of a legitimate customer
of another firm. The bad actor then uses the ACATS system to initiate a
transfer of the account from the customer’s legitimate broker to a new account controlled
by the bad actor. After the transfer is complete, the funds are siphoned away
from the receiving account into an external account controlled by the bad
actor.
Reg. Notice 23-06 identifies the following potential
indicators of ACATS fraud that have been observed through FINRA’s regulatory program:
With ACATS fraud on the rise, FINRA has urged its members to take steps to mitigate the risk of falling victim to ACATS fraud, including timely investigating potential fraud, verifying customer information for accounts opened online, swiftly communicating account transfer confirmations to customers and escalating potentially fraudulent transfers to the firms’ respective Anti-Money Laundering (AML) programs.