Is Your Utility Protected from Fraudulent Transfers?

​Why Commercial Crime Coverage—and Proper Procedures—Matter More Than Ever

As financial scams become more sophisticated, water utilities across Texas must stay vigilant. One increasingly common method of fraud involves impersonation—bad actors posing as employees, vendors, or customers to trick organizations into transferring funds. Fortunately, commercial crime insurance can offer vital protection—but only if your organization follows the right procedures.

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Understanding the Risk

Under a commercial crime policy, coverage may include:

• Fraudulent Employee Instructions: If someone impersonates an employee and sends a fake transfer request, resulting in a financial loss, your policy may respond--if verification procedures are followed.
• Vendor/Customer Impersonation: Similarly, if a scammer poses as a trusted vendor or customer and convinces your utility to send money, that loss could also be covered—again, only if the correct safeguards are in place.

The $25,000 Rule You Can't Ignore

If your policy has a limit of $100,000 or more, you are required to verify all transfer instructions for $25,000 or more. This means having a documented, pre-arranged callback procedure or another form of verification before releasing funds. Failure to follow this protocol can result in denied claims—and devastating financial losses.


What You Should Do Now
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• Review Your Internal Controls: Ensure that your staff follows a consistent verification process for all wire transfers—especially those over $25,000.
• Document Your Procedures: Keep clear records of how transfer requests are received, verified, and approved.
• Train Staff: Make sure everyone—from finance to administration—understands your utility’s fraud prevention protocols.
• Evaluate Your Coverage: Confirm that your commercial crime policy includes fraudulent impersonation coverage and that your limits reflect your exposure.
  
  

Additional Note on Bond Requirements

In many cases, the treasurer or tax collector is required by law to be bonded. However, there may be exceptions. Be sure to check your local statutes and confirm whether bonding is required for your utility’s financial officers.