Asset Theft

Identity theft has become an unfortunate part of life, with all the personal information scammers can access about you online. The Identity Theft Resource Center that reports on data breaches involving sensitive personal information rose 83 percent in 2021, compared to 2020.

Identity theft refers to a situation in which someone uses your identity without your permission, typically to commit fraud for financial gain. This could include use of your sensitive information such as your social security number, bank account number, brokerage account number, or your medical insurance information. It could also involve use of more readily available information such as your name, your date of birth or home address.

Once they have this information, fraud perpetrators may use it for their own purposes. Among other things, they could use it to:

• Set up credit accounts in your name
• Open an account with a utility company, such as phone, gas, or electricity account
• Steal money or securities from your financial accounts
• Access your tax refund
• Make use of your online accounts

The theft of assets from financial institutions is on the rise. One such alarming scam involves ACATS fraud. In a situation where customer account information is stolen, a bad actor may use this information to effect ACATS fraud in the following manner:

Using the stolen identity of a legitimate customer of a carrying member, a bad actor will open a brokerage account online or through a mobile application in the name of the legitimate customer at the receiving member to create a new account. The bad actor may open the new account solely using stolen information or with a combination of stolen and false information (e.g., false email address or phone number).

Shortly after successfully opening the new account at the receiving member—generally, within a few days or weeks—the bad actor will then provide the receiving member with a TIF to initiate a transfer through ACATS of the legitimate customer’s account assets from the carrying member.

Once the ACATS transfer of the assets to the newly established account at the receiving member is completed, the bad actor will (within a short period of time) attempt to move the ill-gotten assets to an external account at another financial institution by:

• transferring the account assets (i.e., cash and securities) to an account at another financial institution;
• liquidating the securities or a portion of the securities transferred into the new account, then transferring any realized proceeds (along with any cash that was transferred to the new account) to an account at another financial institution; or
• purchasing additional securities using the transferred cash and then transferring those securities to an account at another financial institution.

ACATS fraud is related to the growing threat of new accounts being opened online or through mobile applications using stolen or synthetic identities.