February 6, 2018
Third Party Distribution Requests
Today we will be discussing third party distribution requests. Assisting clients with distribution requests is a recurring service that advisors provide to their clients. We want all advisors to be aware that there are increased risks when the request is to send money to a third party. As the advisor, you should have a heightened awareness whenever you receive a third party distribution request. Once the money leaves the client’s account, it may be impossible to get it back if it turns out to be a fraudulent transaction.
Know your client. Criminals may use phishing attempts or other social engineering schemes to try to get you to process a distribution from a client account. Know who you are dealing with at all times and never request a distribution based on email communications alone.
Horter will only process a third party distribution request that has been submitted on a properly executed distribution request form that has been signed by the client. As added protection, Horter will contact the client to confirm the transfer and the transaction will be reviewed by our Chief Compliance Officer, Jason Long, prior to disbursing any funds.
As the advisor, you are the first line of defense in protecting your clients against unauthorized distributions. Be wary of any red flags, including but not limited to:
- Emails supposedly from the client that say they are unable to talk on the phone and must communicate via email.
- Emails that communicate using language that is not consistent with other legitimate email communications you have received from your client, including inconsistent grammar or punctuation, poor spelling, etc.
- Requests that state time is a critical factor and the distribution must be done immediately or the client will be harmed in some fashion (e.g. they will lose a house or property they are closing on if funds are not received immediately).
- Large dollar wire transfers
- Request to send funds out of the country
It is never permissible to transfer funds from a client account to an account controlled by the advisor or an account that the advisor has a beneficial interest in (as owner, beneficiary or trustee).
To reduce risk, our preference is for clients to send funds to their bank of record or address of record, and for the client to disburse funds to third parties themselves. We understand that this is not always possible, however, so we ask that you be vigilant and help us ensure that no unauthorized transfers ever occur in a client account.
If your client wishes to submit a distribution request form requesting a transfer to third party, please be sure to inform them that a representative from Horter will be contacting them at their phone number on record to confirm the transaction. Please also allow sufficient time for processing as we will not rush any third party distribution requests.
Also, please note that our custodians utilize different forms and have different internal procedures regarding third party distributions. Please contact your IAR Support specialist at Horter for additional information if needed.
We hope you found this information useful. You can access this blog and other compliance blogs on our website at wwww.hortertrustedadvisors.com. As always, if you have any suggestions for future blog posts that you would like to see, please just let us know.