TSA and Devonshires warn housing associations over electronic transfer fraud

The Tenant Services Authority and law firm Devonshires have warned housing associations to be on the lookout for a “widespread” fraud involving electronic transfers.

In an alert issued last week, the TSA and Devonshires urged all Registered Providers (RPs) to 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,” the alert said. “If you check the payment details with the supplier and the payment is diverted then it is the supplier's liability, not yours.”

The alert said that there had been a significant number of actual and attempted frauds in recent weeks targeting electronic payments between Registered Providers and their suppliers.

“These involve the diversion of legitimate payments to bank accounts controlled by the fraudsters from which the funds are quickly laundered,” it said. “We understand that similar fraudulent activity has been targeted at local authorities and building companies over the last year.”

The alert explained how the fraud – which has also been used to divert payment to tenants – works:

• Using supplier headed paper or via an email seemingly from the supplier, the fraudsters send an instruction to the RP to change the supplier's payment details
• The RP then changes the supplier's payment details on their system and subsequently makes a payment for services legitimately provided. That payment does not reach the supplier.

“Banks do not check names against the account details provided - they just pay the electronic account details given (account number and sort code),” the TSA and Devonshires said. “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.”

The alert also said that when making large payments – such as 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.