How to keep fraudsters from taking over your client’s annuity account

Annuity account takeovers continue to be a serious fraud scheme within the financial services industry.

If you are unfamiliar with this concept, this is how it works:

1. Fraudsters gain access to annuity client information; this usually occurs from a breach of client information.
2. The fraudster bypasses an insurance carrier’s client authentication process by using the client information obtained from the breach and is able to make changes to the client information on file at the carrier.
3. The fraudster changes the client’s bank information, directing future fund disbursement to the fraudster’s bank account.
4. The fraudster contacts the carrier at a later date and requests a partial withdrawal of the annuity.
5. If the partial withdrawal is complete, the fraudster calls back again, requesting a full withdrawal of the annuity.

By the time the client or their financial professional becomes aware of the withdrawal requests, the annuity proceeds have been distributed.

Carriers and brokers are continuing to discuss this scheme. Carriers have taken several fraud prevention steps within their organizations to mitigate financial risk to their annuity clients.

Do your part to mitigate fraud risk

In addition to carriers taking steps to mitigate this risk, financial professionals also should take steps. These steps include the following:

• Frequency: Regularly change your computer, phone, email and carrier logins and passwords to further protect client information that is being maintained in your email, on your computer, or when accessing various carrier/industry portals containing client information.
• Responsiveness: Be aware of fraudulent trends, such as account takeovers, and how these and other fraudulent schemes apply to your business. Annuity account takeovers can be transferrable to other insurance-related businesses, such as life insurance. Instead of the fraudster compromising annuity proceeds, they also could take out a loan against a life insurance policy.
• Authentication: Confirm who you are speaking with on the phone and in person. Fraudsters are not afraid to make phone calls or push the envelope if needed. Carriers have encountered a number of phone calls directly from fraudsters trying to pose as financial professionals, customers and even regulators.
• Usage: Limit the use of personally identifiable information and only use and share information on a need-to-know basis. For example, when providing a policy number via email, don’t include the client’s name or other identifying information such as date of birth. The more information provided in an email or other means, the more likely a client’s information could be compromised.
• Diligence: Protect client information by applying the “parent test!” If you had private information about your parent, what measures would you take to protect this information?

Joy Dawe is senior vice president, market conduct, Crump Life Insurance Services. She may be contacted at [email protected].

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