By: Brad Heagy, CFP® and Kari Baer, CFP®, CFA
Fraud is real. Thieves are real. None of us are immune and typically they strike at the most in-opportune moments. Then again, when is the opportune moment to find out someone pierced the veil of your coveted financial life?
Through our careers we have seen many instances of attempted thievery. And the more digital our lives become, the more corners there are to look around. Consumers rely on their bank, their advisers, aftermarket software, etc. to look around these corners. In our experience, the human touch and instinct has still been good at ‘stopping the steal.’
When It Got Real
Take for example the real-life story of a client who travels often to the UK. They are wealthy, love art, have two kids (let’s call them Mary and Sam) and work with advisers at XYZ Financial. We know them well, they know us well. We know their voice, their interests, their habits. So does the person who has been reading their emails for the past three months.
It doesn’t take a genius to then email their advisers, request a wire for a piece of art ‘they’ saw in the U.K. while at an exhibit with Mary and Sam. Send some downloaded pictures from Facebook and boom... there is a pretty compelling and normal case for sending a wire, right? Sure, it's a different account, but they said they were trying to catch a train to this cool winery they wanted to try. The same one they told me about before the trip. Human instinct popped in and the gut feeling wasn’t wrong. We called them. Crisis averted.
Or how about the clients who called us to mention that they went to file their taxes, but were told someone else had filed them already. The next call was to the IRS.
We could also bring up the client who bought a new car from a Lexus dealership, paid the down payment with a check and drove her new Lexus home... only to find out days later that someone hacked her checking. Gee, I wonder how they got the info? These opportunist vermin are lurking everywhere. We won’t out the bank, but most people would rather get a root canal while being dipped into ice cold water than have to start all over with a 20 year old checking account. First world problems, I know.
Account takeover (ATO) incidents, where unauthorized individuals gain access to others' online accounts, have been on the rise in the U.S. They are up 21% since 2021. Of these incidents, 42% involved banking accounts, placing them second to social media hacks.
Working for a bank until recently, we have seen the evolution from getting an email and matching a voice to now a much more stringent standard. But, as many are likely calling into a call center when this happens the personalization in a time of crisis can be scarce. Relying on your adviser team is a key firewall. We know our clients' dog's name and even what is in some of their refrigerators.
Look, this is the world we live in. Play offense, but you better play defense. These sub-humans aren't just going to get off your lawn. You need a fence... an electric one. Naivety will eventually bite you in the unmentionables. Preparing for how you keep the assembly line of life going is just as important.
One of the biggest problems with a financial hack is how you keep your bills paid, keep the ATM functioning, stop checks from bouncing and lessening the feeling of helplessness. Trust us, your creditors don’t want to hear that your dog ate your bill, which is the same as ‘my checking account got hacked.’ Grocery stores won’t start a tab while you grab some milk and ground beef either. Stay liquid.
There are many ways to keep the liquidity flowing when faced with an inevitable hack:
Credit Cards: To some they are the devil and swear them off like having candy in the house. But keeping one or two handy can be a savior while getting a mess sorted out.
A Back Up Account at Another Bank or Financial Institution: If your main checking account has been compromised, the bank institution will recommend placing a fraud freeze on the account. What does that mean? Money can be deposited into the account, but not withdrawn from the account. Well, all those automatic withdrawals set up are now null and void. You scramble to open another account... bad news that could take 24-48 hours (or even more) to be issued a new bank account number. This is where having another account to use for your monthly expenses would come in handy.
Home Equity Line of Credit (HELOC): If you own a home and have some equity, opening a HELOC gives you access to liquid cash. Basically, you are using your home as a bank. Typically these are tied to a separate checking account and can be used in a pinch.
Cash at Home: Look, the world is fragile. Ever sat and pondered what you would do if a once-in-a-lifetime event happened and the electronic banking and cash flow system went down for a few days or weeks? Not pretty. Cash would likely still be king. But if it’s stuck in an ATM it’s useless. And if it’s not cash, then maybe we barter with some canned soup for a couple Motrin.
Fraud Resistant Checks: This is a special check that is more complex to copy. Yes, I said copy. You not only have to worry about someone stealing your checkbook, but someone can also copy your check even electronically. Make Frank Abagnale Jr. proud (Catch Me If You Can movie reference for those who missed one of the greatest fraud stories ever told).
Try Not to Use Your Debit Card: Using your debit card at places of business (where it's likely to have skimmers) can be very risky. The usual suspect for a skimmer is the gas station. If you don't have credit cards, or you do better from a budgeting perspective to use your debit card, please be careful with where you use them.
What Do I Do if I'm Compromised?: Act fast and do not wait. I know that this is the last headache that anyone wants to deal with, but time is of the essence. You have a certain window of time to let the financial institution know about the fraud. If you don't let them know timely, you might not be able to review those fraudulent charges and get the funds back.
Like the gas that never stops coming out of the pump, the electric that magically comes out of the wall or the groceries that appear on shelves, being prepared for a snafu in your financial life is vital. The fix takes time and damage can build up quick. Unlike the gas pump not working or the lights not working, you are on your own with financial hacks. You hope that you are never a victim... and we hope more get prepared.
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