6 degrees of fraud

The 6 Degrees of Financial Fraud Separation

According to the Six Degrees Rule, created by financial analyst Andrew Weinreich and made hugely famous by Kevin Bacon, any two people on Earth are only six or fewer acquaintances apart from knowing each other. It’s a fun concept—but in the financial industry, it points to a dangerous risk.

Odds are, if you work in the real estate, mortgage or banking industries, you’ve done business with a:

  • real estate agent
  • appraiser
  • lender
  • title agent
  • mortgage scammer

Maybe not knowingly or in that order, but you get the idea.

In the financial industry, a payment scandal is theoretically only six degrees (or less!) away.

Sound too crazy to be true? Let’s look at some statistics.

Check and wire fraud are at an all-time high

The Association for Financial Professionals (AFP) recently came out with some startling wire and check fraud statistics.

A specific fraud scheme known as the business email compromise (BEC) scam involves a phishing email impersonating C-level persons, that convince the recipient to send a wire transfer. This particular scheme affected 74 percent of the companies surveyed — “a concerning 10 percent increase from 2015 levels.” In the same study, 75 percent of companies said they they were victims of check fraud.

“75 percent of companies surveyed said they were hit with check fraud in 2016.” —AFP Payment Fraud Survey

Terrifying, right?

If 74 percent of companies have reported wire fraud just from one type of scheme involving the C-suite level, what amount of fraud could be affecting the entire business? And here’s the billion dollar question: How many of those scams involved people that the company trusted? How many of them involved a second-, third- or even fourth-degree of separation?

Knowing Your Vendor is the new KYC in Real Estate

Fixing this problem starts with vetting and verifying who you are sending the payment to in the first place. The second step is vetting and verifying the vendors of the partner you do business with.

It’s this second step, tracking down third- and fourth-party vendors, that really puts a wrench in trusted networks. Not because of their role, but because we don’t know them personally and it can take a concerted effort to get to know them.

Well, now you can start getting to know third and fourth parties, easier than ever. ATS Secured gives users the ability to verify and vet who they are connected with on the platform —no matter the degree of separation.

You can also establish risk tiers for vendors, and alerts for when they need to upload soon-to-expire certifications.

All this and so much more can be found on the ATS Secured platform. Contact us today to find out more!