After recent reports in which public agencies in New Mexico and Nevada were targets of a money-transfer scam, Nevada Department of Transportation Director Rudy Malfabon is warning state DOTs and other agencies to be on the alert for frauds posing as legitimate vendors.
Malfabon said his department was among those targeted in the past year, but thanks to prompt notification by its actual contractor the NDOT was able to thwart an attempt to illegally divert an electronic funds transfer away from that vendor.
"This scam can hit any public agency, but my concern is that they seem to be attempting this everywhere," he told the AASHTO Journal. "Agencies should have proper controls to avoid this scam."
Malfabon sounded the alarm after the Albuquerque Journal reported April 6 that the city of Albuquerque, NM, had been "bilked out of about $420,000 in March after falling for a scam in which payments meant for a vendor were sent to the scammer via wire transfers."
The story said the New Mexico Office of the State Auditor had explained in a news release "that the city had complied with a fraudulent request to change vendor payment information that diverted the public funds to the scammer."
Albuquerque's chief administrative officer told the Journal that city officials were working with both state police and the FBI cybercrimes unit to investigate.
But Albuquerque was just among a growing list of targets. The same story said an elementary school in Socorro, NM, lost more than $200,000 in construction funds in a similar scam.
And Malfabon pointed to another news report from last November, about how the Regional Transportation Commission of Southern Nevada lost $1.4 million when it processed an electronic funds transfer request after it allegedly received an email that appeared to come from one of its construction vendors.
The illegal activity could pose challenges for public agencies such as state DOTs that regularly process electronic payments to contractors, Malfabon cautioned.
"The scammers send an email that looks legitimate," he said. "They use the company logos and email extensions to a fake employee or use a former employee's email address. They state that they switched their banking to a new account and request the EFT be deposited elsewhere."
The Albuquerque Journal's report included the auditor's call for agency employees to use "best practices" to head off such fraud.
"Those best practices include verifying the legitimacy of any request to change payment or banking information before processing the change," the story said. It added that the auditor's office "recommends that vendors be contacted directly through a phone number or contact person obtained through a known source, such as their public website."
Here is the full advisory the New Mexico auditor's office issued this month that details how the scam works, along with steps agencies can take to head it off.