NEWS, EVENTS, PUBLICATIONS & EMERGING ISSUES
SW&M EMERGING ISSUE
July 1, 2008
FRAUDULENT WIRE TRANSFERS
As a follow-up to our January 11, 2008 client pool letter regarding wire fraud schemes, we believe it is appropriate to remind our credit union clients of the need to ensure that their wire transfer security procedures comply with their bond carriers' requirements. We are aware of at least one widely-used bond carrier's position that it will not pay for any loss under its Funds Transfer Coverage if the loss resulted from fraudulent wire transfer instructions received through email, by fax, or by telephone, unless the credit union did one of the following:
- Performed "callback verification" as defined in the credit union's bond; or
- Followed written, commercially reasonable security procedures set forth in a written funds transfer agreement signed by the member or member's authorized representative.
We highly recommend that our credit union clients obtain assistance from counsel to ensure that their wire transfer procedures comply with the bond carrier's requirements. In addition, credit unions should ensure that their written wire transfer procedures are understood by and being followed by employees responsible for carrying out wire transfers.
Please contact our office if you have any questions regarding wire transfer procedures or desire assistance in reviewing and, if necessary, updating your credit union's procedures.
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