The Importance of Escrow Payment Recipient Name Matching to Avoid Wire Fraud Harm

February 12, 2020

Yesterday the Federal Reserve Chairman Jerome Powell testified in front of the US House  Financial Services Committee about monetary policy generally, however he was asked an interesting question during his appearance by  Representative Brad Sherman (D-CA).

Rep. Sherman inquired why the Federal Reserve does not establish a payee name matching requirement to prevent wire transfer fraud when wires are criminally misdirected to parties who are not the intended recipient.

Thus if a lender directs that proceeds of a mortgage loan be sent to “John Doe” yet during the closing process an offshore hacker intercepts email communications and substitutes wire instructions so that the wire is sent to “ABC Co. Ltd.” instead, why is the wire even approved?

We know that many banks do verification on incoming wires.  I have had a few wires held up or rejected when the sender misspelled my name or the name of my company.  Why wouldn’t name matching rules be implemented for outgoing wires as well?

While we cannot manage the Federal Reserve name matching rules, here at Secure Insight we do go beyond just verifying that wire instructions were previously used or that they simply match an account at a US bank in the Federal Reserve system.  Our analysts verify that the name on every account matches the name of the vetted and verified account holder, and when there is a discrepancy between what was presented to us and public records (licenses, insurance, bonds, corporate filings we require a written explanation and additional evidence of ownership before the account is posted in an business profile and cleared for our lender to send outgoing wires.

Wire fraud is the single largest risk to banks (and most consumers) today.  It is a multi- billion dollar crime epidemic. While we go along way to make sure our client’s only wire to trusted accounts, and have successfully supervised millions of loan transactions without a wire fraud loss, we encourage the Federal Reserve to examine the issue of payee name matching as an additional and critical component to overall wire fraud deterrence.

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