FINRA has warned of a rising trend in fraudulent transfer of customer accounts through the Automated Customer Account Transfer Service (ACATS), an automated system administered by the National Securities Clearing Corporation (NSCC). The system helps transfer customer account assets between firms.

Stolen identity

ACATS fraud often happens when a bad actor uses a stolen identity to open an online brokerage account in the name of a legitimate customer. The bad actor will then provide the receiving member with a Transfer Instruction Form (TIF) to initiate a transfer through ACATS of the legitimate customer’s assets. Once that transaction is completed and assets are with the newly-established account, the bad actor will then attempt to move the assets on by:

• transferring the assets into an external account;
• liquidating securities and transferring realized proceeds to another account;
• buying additional securities using transferred cash and subsequently moving the secutities to an external account.

FINRA has previously warned that bad actors may be “targeting firms offering online account opening services and perhaps especially, firms that recently started offering such services”.

FINRA’s statement also contains specific advice on regulatory obligations in this area, and on reporting mechanisms.