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Widespread fraud affecting electronic transfers
All Registered Providers (RPs) should check their electronic payment instructions to ensure that they are not being diverted. If they are not checked and a payment is made to a fraudster then the liability to make the genuine payment remains and will need to be paid again. If you check the payment details with the supplier (as recommended below) and the payment is diverted then it is the supplier's liability, not yours.
In recent weeks there has been a significant number of actual and attempted frauds targeting electronic payments between RPs and their suppliers. These involve the diversion of legitimate payments to bank accounts controlled by the fraudsters from which the funds are quickly laundered. We understand that similar fraudulent activity has been targeted at local authorities and building companies over the last year.
The fraud works in the following way:
Banks do not check names against the account details provided - they just pay the electronic account details given (account number and sort code). Therefore RPs need to take care when making electronic transfers to ensure the account details are correct and confirm any change in details with the supplier in question and not just accept such notification. We suggest confirming such requests with the supplier's Finance Director or equivalent.
When making large payments - for example to builders, developers, maintenance companies and even the Inland Revenue - RPs should request verification of the receiving party's account details in advance and from a reliable source within the payee.
This fraud has also been used to divert payments to tenants.
This alert has been brought to you by Devonshires and the Tenant Services Authority. If you have any questions regarding the issues raised above, please contact:
Philip Barden, Partner and Head of Litigation
philip.barden@devonshires.co.uk
