I read this post on Reddit a while ago: Vanguard closed my account for fraudulent activity.
I sold a property, received my payment via check and decided to invest the money in Vanguard. I opened a Vanguard account online and linked my bank, transferred $10 to my Cash Plus account, opened a brokerage account and deposited my check on Friday to the brokerage account. The check was accepted. On Tuesday, I received a call from the check issuer that the check cleared. I logged in Vanguard and I can see it was processed but not available till after 7 days. Everything seems easy, so I thought. Later the same day, I tried to log in and I got an error message, “Access to your account has been disabled. Please contact us.” I called Vanguard and spoke to a rep. They told me my account is being reviewed by the research team and they will be contacting me in 72 hours. I waited 72 hours and called again. Same response. 2 days later, I received a voicemail from the Vanguard fraud team.
“Hello, this is the fraud team calling to let you know the account you inquired about has been restricted due to fraudulent activity. The attempts to bring funds into the account have been rejected. Any electronic bank transfer can be recalled through your bank. Again the account is permanently restricted and there will not be a follow-up to this issue.”
This poster eventually got the money back when Vanguard returned the money to the check issuer.
This type of fraud restriction isn’t limited to Vanguard. Fidelity has had a wave of fraud attacks recently. Criminals recruited existing customers as collaborators (“mules”) for a 50/50 split to make fake deposits and withdraw the money.
Fidelity turned up their counter-fraud measures to thwart these attacks. Many customers reported seeing their accounts restricted, debits declined, Bill Pay canceled, mobile deposit limit cut to $1,000, or the deposit hold times extended to up to 21 days. No doubt many of these are false positives. Attacks from within are the most difficult to combat. It’s hard to distinguish who’s legit and who’s knowingly or unknowingly working with criminals.
I use Fidelity for all my spending. As I mentioned in the previous post Ditch Banks — Go With Money Market Funds and Treasuries, I have under $100 in outside bank accounts. All my cash is in a Fidelity account in money market funds and Treasuries. All my bills are paid out of this Fidelity account. It’ll cause problems if Fidelity restricts my account. I’m not concerned about that possibility because I follow this one simple rule:
Make all deposits by ACH push.
An ACH push is initiated at the same place where the money currently resides (see ACH Push or Pull: The Right Way to Transfer Money). Employer or government direct deposits also come in by ACH push. I make all deposits to my Fidelity account by ACH push. For example, when I transfer the credit card rewards earned in a Bank of America account to Fidelity, I initiate the ACH at Bank of America.
Money received by ACH push is trusted money. It’s available right away because the receiving institution isn’t responsible for it. You have nothing to worry about having your account flagged for fraud when all the money coming into the account comes by ACH push.
The Reddit poster at the beginning of this post didn’t follow this rule. I venture to say that everyone who had their Fidelity account restricted recently also didn’t follow this rule. Check deposits and ACH pulls are untrusted by the receiving institution. Not every check deposit or ACH pull will get the account restricted for fraud concerns but those who had their account restricted most likely had made check deposits or ACH pulls.
My Fidelity account is functioning normally as usual. I wouldn’t have known this storm was happening if I hadn’t read Reddit. My mobile check deposit limit is still a whopping $500,000 per day although I have no physical checks to deposit. All debits for estimated taxes, credit card bills, utility bills, and PayPal and Venmo payments went out without a hitch. I don’t know what the hold time will be if I do an ACH pull right now because I don’t make deposits by ACH pull anyway. I just initiated another ACH push from Bank of America to my Fidelity account. I expect it to be available immediately upon arrival as usual.
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August West says
You can not ACH push to transfer money to Vanguard. You can request that they do an ACH pull, or you can do a wire transfer to/from Vanguard. It is not possible to do ACH push from an outside financial institution to a Vanguard brokerage account. You can, with some difficulty, get them to give you the routing and account numbers to use for direct deposit but you can not use that mechanism for depositing checks as described in the example that you cited where a real estate sale check was deposited to Vanguard (i.e., the account holder could not have deposited that to Vanguard by ACH push from the check-writer).
Harry Sit says
Yes you can ACH push to a Vanguard Cash Plus account.
Steve says
Large proceeds at title company from sale of real estate:
Wire directly to Fidelity/Vanguard? or
Wire to local bank first, then wire/ACH push to Fidelity/Vanguard? or
Other method?
What is best approach?
Ouzel says
I have the same question. A few years ago I sold my condo and deposited the title company’s check in my Wells Fargo checking account, then after the check cleared, logged into my existing Vanguard account and moved the amount into my money market account. As far as I know, there was no way to push the amount from Wells to Vanguard.
Harry Sit says
It would be the easiest to wire directly to Fidelity/Vanguard. Wiring to Fidelity/Vanguard requires a “For Further Credit to” field in the wire. Title companies know how to do it because they do it all the time.
ME says
Harry – how would you deal with check deposits? Deposit them first in your backup brick-and-mortar checking account and then push the funds to your Fidelity pseudo-checking account?
RobI says
Hi Harry
Is there a way to push monthly dividends to Fidelity brokerage/ bank account from my credit union CD account. That institution uses Plaid for push. The Plaid UI is telling me It does not support Fidelity connectivity. I’m currently using ACH pull from Fidelity to work around this, but this article has me concerned.
RobI says
Actually Googled and found an answer on Reddit. Seems like Fidelity has recently blocked Plaid Connectivity. Some speculation on reasons in the thread
https://www.reddit.com/r/fidelityinvestments/comments/16vl2cp/fidelity_no_longer_supported_by_plaid/
I’m now torn on pushing from my CD holder using Plaid to BoA and then pushing to Fidelity, or continuing to use Fidelity pull method.
Harry Sit says
You can still add your Fidelity account at your credit union when the credit union uses Plaid. Search for a non-existent bank in the Plaid UI and then click on “Link with account numbers.” It will make Plaid use a micro-deposit to verify your Fidelity account. I have a screenshot here:
https://thefinancebuff.com/fidelity-cash-management-checking-savings.html#htoc-routing-number
RobI says
Thanks Harry. Unfortunately the option to just add account numbers is no longer available via Plaid UI, at least in my institution. If institution is not found in search, if just offers to Exit and go back. I’m thinking they maybe blocked this back door as a security concern?
Harry Sit says
It could be a configurable setting disabled by your credit union or it could an older version that didn’t have the option to link by account numbers.
Craig says
Love your work Harry.
Like you I’ve used Fidelity as a one stop shop for many years. This event has shown me that lightning can strike at anytime – I’m moving my cash management back to my long-standing local credit union checking and forgo the interest earnings on my cash float. I’m also moving some of my investments to another brokerage to be able to manage through weeks or months long account locks.
It sickens me that this is necessary, but my cash management account must be rock solid and unquestionably secure.
M. Smith says
Harry,
You are very likely wrong on this for several reasons.
First, there are a ton of details about this story that are suspicious. The proceeds of the sale of a house would not normally be delivered by business check. They are almost always wired or second using a cashier’s check. And the issuer of a check would almost never call someone to tell them that they check has been cashed, as this storyteller claims.
Second, even assuming that the above details were true, it is still very unlikely that a large opening deposit **by check** was the reason the account was flagged. If it were, Vanguard would likely not have negotiated the check, which they did here before returning the funds.
Financial institutions often have seemingly arbitrary reasons for flagging a new account as fraudulent. It could be an inconsistency between the amount of the deposit and his stated income, and that would have been an issue regardless of how the money arrived. I’ve seen financial institutions refuse new accounts for fraud concerns simply because I used a VOIP telephone number or a unique or privacy email address on the account application. (By contrast, I’ve never had an account closed if I changed the phone number of email address after the account was opened). People also get flagged because their name is on the OFAC list, and sometimes even because their name is similar to a name on the list.
Often banks use a points-based system to flag new (and existing) accounts for fraud. A new account application by itself has a certain number of points. A similar name to one on the OFAC list by itself, might not be a problem, but a similar name, plus a VOIP phone number, plus a disposable email address together with a new account application might push your score over the limit.
I’ve even had banks decline to open an account because I failed to provide my middle name (even though the application said that providing my middle name was optional) because my last name matched an OFAC name. I’ve had at least two accounts refused merely because I used a unique email address and a VOIP phone number.
I’ve never had an existing account closed, but I’m confident that banks use a similar scoring system to close accounts based upon fraud concerns. One bank that I know of reportedly closed hundreds of accounts shortly after it adopted a new fraud scoring model.
While I totally understand your reasons for using ACH push for all transactions, it is even possible that a bank may someday decide that your ratio of ACH push to other deposits is a hallmark of fraud, and you could find your account flagged and your assets frozen. The risk to the bank of an ACH push coming in is that they make the funds available to you right away, but an ACH (like a check) can be clawed back later. If the bank decides your receipt of ACH pushes creates an unreasonable risk, they won’t hesitate to close your account.
Your decision to keep all your assets at Fidelity is a grave mistake. The axiom to “never keep all of your eggs in one basket” includes keeping your assets with a single custodian. If you have more than $500, you should split your assets between at least two different financial institutions.
Wade says
Harry I was hoping you’d do a post on this topic. Since reading your original article on the “push” method for ACH, I always do push. Unfortunately, it’s not a 100% guarantee of success so wanted to share my experience to see if you can identify a flaw in my process.
This is between Ally Bank (12 year customer) and Vanguard (20+ years). I did an ACH push from Ally to Vanguard. The specific Ally account ( I have 3) was linked to Vanguard about a week before the ACH push (possibly the issue? but Im not aware of any holding or aging period on ACH bank links once established). I did the ACH push, all cleared to VG sweep account, I then bought VUSXX, let it sit for a month, then a sold a small portion ($15k) to sweep account, this was less than 1/4 what I deposited the month before, and maybe 1/10th of my preexisting balance in the MM fund. There was more than enough aged money in the account to cover the withdraw not even including the deposit from a month earlier. Vanguard then refused to allow me to send that money to any other account (even ones that had been linked for about 6 months) other than the original account it initiated from. Keep in mind, all the accounts are with Ally. So both ways, push to Vanguard, push out, yet still blocked. This was all between early august and middle of Sept. Im sharing only because even doing the push, waiting what I believe was the correct amount of time, still locked up my funds, and not just the original amount, ALL of the funds in my VG MM fund I was unable to move anywhere! I was moving the money for quarterly tax payments, so I ended up doing as VG said and returned the smaller withdraw to the original account and fortunately, I was able to then move that money to the account at Ally I wanted it in for my tax payment. If not, this could have turned into a big issue. I think the most frustrating part of all of this is that I felt I was following the rules, waiting an appropriate amount of time, yet still blocked.
Wade says
actually disregard. I just double checked and it was a Pull from Vanguard on the original deposit. Still the whole larger balance getting blocking a smaller transfer didn’t make any sense to me even protecting from the original deposit, the math didn’t make sense.
Craig says
I like doing ACH pulls at Fidelity because I can invest the money immediately instead of having to check back the next day. It’s really a shame if these fraudsters prevent us from doing the most optimal thing.
Scott D says
The attempts to bring funds into the account have been rejected.
Doesn’t this mean that Vanguard shut down the account because his bank failed to deliver the money? Could be a mistake on the bank’s part but if they aren’t releasing the funds I can’t imagine how Vanguard would do it any differently.
Harry Sit says
No, Vanguard received the money but didn’t want it. Vanguard eventually returned the money to the check issuer. See the update in the Reddit post at the end.
Steve says
Bogleheads forum thread about Fidelity locked/restricted accounts. 178 posts in last two days:
https://www.bogleheads.org/forum/viewtopic.php?p=8043097#p8043097
Besides a locked account, concerns on the forum include:
–suspected fraud on a single account leads to all accounts being locked
–three week wait to be able transfer funds received at Fidelity from external institutions originated as an ACH pull at Fidelity
–if account is locked, must resolve with fraud department 9-5 weekdays, long waits
–scheduled billpay payments are not issued leading to overdue payments.
These concerns make me re-think my plans to rely on Fidelity CMA as primary “banking” account.
Harry Sit says
The difference in the recent attack at Fidelity is that some customers were recruited as collaborators/mules. If they gave their login credentials to criminals to deposit a check, all accounts are at risk. It doesn’t only affect the recently deposited check or only the account that received the check.
russt says
I had a nightmare experience last year, exactly as described by the Reddit poster. It took nearly 3 months, numerous exchanges of documentation, visits to the local office, and finally a 3 hour conference call with Fidelity and a trust attorney to get my account cleared. Fidelity had immediately accepted my opening deposit check, which I posted via their mobile app, but then revoked all online access after a few days.
The only good thing is they paid interest on the money during the period when I was locked out.
One thing I can advise, is to do the initial deposit in person at your local Fidelity branch, and do not open an account online. Open it in person. This might have avoided my nightmare.
Another thing I learned is that the “fraud” unit at Fidelity is separate from the “cyber” unit. Once my account was finally cleared by the fraud unit, the cyber unit shut off my access after one day. Then they did it again. It took three tries before whatever was bothering them stopped bothering them.
After this experience, I’m very reluctant to do business with Fidelity.
I had a more recent problem with Chase, pushing ACH to Schwab. Verified with micro-deposits, but as soon as I did the first push, Chase cancelled the transaction and revoked our online access. Customer support was no help, except in reestablishing access. Tried again after access restored, same result: online access revoked. I’ve always been able to do pulls, but I gave up trying to push. I still don’t know what the problem was.
Be aware that the rules have changed radically in the last few years. The “know your customer” doctrine is in full force, and banks have no incentive to take on any liability for deposits or transfers.
Those of you who think this can’t happen to you, because it has never happened to you, are living in a house of false hope. I’d never had it happen to me in the 50+ years I’ve been doing banking, and in the 30+ years I’ve been banking and trading online. Just be very careful, and do business in person where possible.
Steve says
russt: Thanks for sharing your experience. Three months locked out…. ugh.
Was this particular account your first account at Fidelity, or had you done business at Fidelity previously?
Did you ever get an explanation of what caused the account to be locked?
russt says
We have an HSA account with them, and I had an old 401k account with a former employer, zeroed out a decade earlier.
Weirdly, they forced me to use my old credentials for the 401k account, as it was tied to my SSN. For a while, I thought that might have been a problem.
First, I had to verify my identity, which I did at the local office, who forwarded the info to the fraud unit. Before that, the reps wouldn’t talk to me. After that, I was able to email with a rep who was assigned to my account. That was some help, but not much.
The main problem they presented me with was to prove that the check, which they had already deposited, was valid.
That was the real nightmare, as it was a one-of-a-kind check from a trust. After 2 more months of going around, it got resolved by the conference call. The trust attorney waited patiently with me for nearly 3 hours, listening to horrific background music. Turns out all the documentation I had sent had been lost, due to an clerical error at the local office.
So they released the fraud hold, and then the “cyber” unit closed the account again. Probably because my email and SSN etc was stolen multiple times, but just speculating. Took another week of back-and-forth between the fraud unit and the cyber unit before they finally released the account.