The peaceful pastime of carefree yachting has now become a target for hackers and fraudulent behaviour. As the age-old construction adage goes - measure twice, cut once. Well, there is no reason that concept should not be applied when sending money electronically. Yachts are getting bigger and bigger, and the need for additional security measures is growing too.
Recently, a buyer of a yacht entered into an agreement with the seller in which the seller chose to act as a bank and accept monthly payments directly from the buyer for the purchase of the yacht. In this case, the buyer would wire money directly to the seller each month until the loan was paid off. Before the loan matured, the buyer and seller made an agreement for the buyer to pay off the remaining debt in one payment.
Instead of having the buyer pay him directly, the seller brought in a law firm to accept payment on his behalf. When the buyer checked his email, he saw one from the law firm that had wire instructions attached. The buyer initiated his wire and paid off his debt - or so he thought.
A few weeks later, the buyer received an email from the lawyer informing him that the law firm never received the wire. The buyer checked his account, and the money was sent. Both the lawyer and the buyer reviewed all the documents to find out that the email the buyer thought was from the lawyer turned out to be from a hacker.
Scrolling up the email chain, the buyer saw that there were two sets of wire instructions, both on the same letter head and both with the same account name. Both sets of wire instructions also had no security measures in place. The money was missing and the finger pointing began. Who is at fault here? The law firm that sends and receives hundreds of wires every month and sent wire instructions without any security measures in place? Or the buyer who sent the money to the wrong account?
The current laws in this area have not adapted with the times. Therefore, as lawyers and yacht brokers, we are tasked with protecting our client’s money. These days, where hackers are now part of everyday life, our obligation has increased immensely, yet many firms still operate as though fraud does not exist.
Much like the above example, wire instructions containing full account details are sent over the internet without any security measures in place. This practice needs to come to a screeching halt. Industry practice should be to check twice and send once!
What does that mean? It is strongly recommended that in a situation you are sending wire instructions: (1) a portion of the account number and details should be with withheld; and (2) the person sending the wire should receive verbal confirmation of the instructions from a familiar voice.
Then, and only then, should the wire be sent and within 24 hours, the sending party should obtain confirmation from the receiving party that money has posted to the account. Deviating from double checking could result in a very uncomfortable conversation and the disappearance of substantial amounts of money.
*The information offered in this column is summary in nature and should not be considered a legal opinion.
Nicholas J. Zeher is an attorney at Robert Allen Law (www.robertallenlaw.com) whose practice includes maritime and commercial litigation, superyacht transactions, and immigration issues. For further information related to this article, please contact [email protected] or (561) 510-9606.