Fraud Prevention Measures When Receiving Funds

With an uptick in fraudulent activity related to governments receiving payments, including large payments such as bond proceeds, GFOA suggests that members immediately implement various preventive measures.  These fraud prevention measures, including sending the government's banking information through encrypted means, should be adhered to by all vendors and bond deal team participants to prevent fraudulent activity.

While these resources focus on ways to prevent fraud when making vendor payments, governments should also be aware of the need to implement measures to prevent fraudulent activity when RECEIVING payments, including wire transfers.  This is especially true when receiving large amounts of funds through wires, such as bond proceeds.

Key fraud prevention measures that governments should apply when receiving funds include:

• Communicate to vendors (preferably in the contract with the vendor) that no change of an entity’s banking information will be sent in an email, and emails indicating such changes should be considered fraud.
• Initial banking/financial information sent to the deal team should be through encrypted means.
• Communicate to vendors that the entity will notify them ONLY BY PHONE or more securely, through a VIDEO MEETING of any changes to the entity’s banking information.  Governments should ask vendors handling any of the entity’s banking information to attest to understanding this policy.
• Communicate to vendors that if an email is received, that they should utilize their own contact information to contact the government, and NOT the information listed in the email.
• Other parties that may facilitate the information about funds being sent to the entity must never accept emails from the government or other parties as an acceptable notification of change.  Other parties must only utilize verbal and/or live video confirmation of changes to entity banking information. 
• For bond proceeds, all parties involved in the transfer of funds should have a video call confirming the wire instructions, including the trustee if applicable.
• Consider using good faith deposits or testing of payment information with a small payment amount from the payee prior to having full amount of funds sent.
• Governments should have the bank/payor utilize payee confirmation systems prior to sending funds.