Council Post: Is Your Retirement Plan Protected From Fraud?

Next Generation Trust Company is the founder and CEO of a trust company that specializes in custodial and administrative services for Self-Directed IRAs.
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As companies work to strengthen their cybersecurity protocols, hackers are becoming more sophisticated. Imagine what bad actors could do if they were able to sneak into the network of a major North American pipeline or a countrywide retailer to steal investors’ identities and commit investment or other fraud.
Regrettably, thieves are increasingly targeting retirement accounts. There are best practices customers can use to protect their personal information before opening any type of retirement account, whether it’s a self-directed IRA or another type of plan (and in some cases, their hard-earned retirement savings). The IRA custodian has a specific responsibility to ensure that protections are in place to prevent fraudulent conduct and client identity theft.
Once a hacker has your account details, they can siphon off funds and modify your contact information, leaving you unaware of the scam until your savings are gone — and possibly put into a new bogus account in your name without your knowledge. It may possibly be too late to recover your damages from your banking institution by that time.
Email spoofing schemes should be avoided at all costs.
Through email impersonation or spoofing, cybercriminals can acquire access to personal information, bank accounts, and more. The victim wires payments according the instructions to what they assume are title firms, real estate attorneys, real estate brokers, banks, or other parties, only to realize they’ve been stolen of thousands of dollars.
ADDITIONAL INFORMATION FOR YOU
Keep an eye out for emails that appear to be legitimate but contain telltale symptoms of fraud, such as strange or erroneous sender addresses, poor grammar, or a sense of urgency. If you suspect you’ve been a victim of fraud, double-check all communications relating to money transfers and inform your banking institution right once.
Keep an eye out for shady investment opportunities.
Have you been approached by someone who offers you an investment that appears to be too good to be true? It’s a possibility. Many people have lost their life as a result of Ponzi scams, and investments that are difficult to analyze or trace should be avoided. Other red signs include: o High-pressure sales methods.
o An investment that is widely advertised on the internet or in publications rather than through a reputable firm.
o Return-on-investment guarantees or assurances of zero risk.
o A safe, IRA-approved, or custodian-approved investment (because there is no such thing).
· Requesting that you wire money or send a cheque to an individual rather than the investing company.
o When there is insufficient or no investment documentation: Prior to transmitting instructions to the plan administrator in the case of self-directed IRAs, the investor is expected to undertake thorough due diligence on an investment. A major red sign is a lack of research resources (for any investor).
Do Your Research Before Investing
Consumers are ultimately in charge of their money. Before submitting personal information to an unknown source, consult a trustworthy counsel to avoid having your identity and retirement plan stolen. Confirm the investment’s authenticity with your financial adviser, banker, attorney, or another trustworthy source, and make sure it corresponds with your investing goals. To learn more and discover if the firm is in good standing, contact your state securities regulator, your secretary of state, the Securities and Exchange Commission (SEC), and the retirement industry’s self-regulatory organization, The Financial Industry Regulatory Authority (FINRA).
Vet Custodian of Your Retirement Plan
Individuals should be educated on how fraud is perpetrated, and part of that education should include screening their plan administrator and custodian for cybercrime prevention methods. Check to see if your retirement plan administrator has implemented the following safeguards:
o Emails containing sensitive account data (such as account numbers) should be encrypted.
o Identity verification methods should be in place from account creation (giving a valid passport or photo ID) to transaction completion (when you call in, they should ask questions to verify your identity).
o Wet-ink signatures or, in some cases, industry-accepted electronic signatures should be needed on original forms.
o For individuals with access to client accounts, limited power of attorney documents and/or interested party designations should be completed and kept on file.
o You should have a “safe investing” checklist on hand to keep you aware about potential fraud risks.
o A disclaimer should be posted on the website or included in the account documentation.
Use resources from reputable organizations to prevent fraud and report it.
o The Securities and Exchange Commission (SEC). o The Financial Industry Regulatory Authority (FINRA). o The North American Securities Administrators Association (NASAA) (AARP).
Notes at the End
Cybercriminals’ techniques are becoming increasingly sophisticated. The greatest way to avoid fraud is to be a well-informed investor who monitors changes in his or her retirement plan. Change your passwords on a regular basis and avoid using the same or similar passwords across all of your accounts (of any kind). Keep an eye on your monthly statements for any strange or unauthorized activity and notify your plan administrator right once. Before wiring funds to any business, do your homework and make sure you understand the investment opportunity. Working with a reputable retirement plan administrator who has put in place precautions to secure clients’ sensitive data as much as possible is also a good idea.
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