[Image:  Paper Dollar Airplane / Nerdwallet.com]

by Howard Haykin

To do so, the broker falsely advised his sales assistant that he had received verbal confirmation from the customer for the wires - and the sales assistant entered that false information onto the firm’s wire request attestation forms. To fund the wire transfer requests, the broker executed sales of securities without the customer’s knowledge or authorization. After the customer complained about the unauthorized transactions, UBS Financial Services reimbursed the customer and terminated the broker.

KNOW YOUR CUSTOMER.    In financial services, ‘Know Your Customer’, or ‘KYC’, is an anti-money laundering (AML) requirement that professionals - e.g., banking and brokerage - make the effort to verify the identity of the client when opening an account and periodically thereafter. In other words, banks and brokerage firms, and other financial institutions, must make sure their clients are genuinely who they claim to be. The objective of KYC guidelines is to prevent businesses from being used, intentionally or unintentionally, by criminal elements for money laundering. Related procedures also enable businesses to better understand their customers and their financial dealings – thereby managing their risks in a well-judged manner. [Wikipedia]

KNOW YOUR BROKER.    Just as broker-dealers have safeguards to ensure against fake and fraudulent customers, so should customers have safeguards against negligent and witless actions by their brokers. For example, you’d be comforted in knowing that your broker would be sensible enough to …

• Not accept an email as the sole basis for any wire request – let alone one for half a million dollars.
• Have on file your correct bank account numbers, which would be matched to any withdrawal requests.
• Reach out to you without hesitation, regarding a question - any question.
• Understand the inherent risks associated with any/all internet communications.

[For further details, click on … FINRA Case #2018060504601.]