How do rich people safeguard money?

August 25, 2010 3:38 AM

How do rich people safeguard their money from theft?

How do people with a lot of money guard against violence, forgery, impersonation and computer tricks to safeguard their money?

Whatever way I approach this problem from I see a big gaping hole. The best solution seems to be to not store money at all, but that isn't the question I'm interested in.

If the money is stored in term accounts, then the money is still accessible minus a penalty - or perhaps indirectly by selling the right to buy the money to someone else in exchange for less money now.

So how do they do it? (Do they do it?)

posted by devnull to Work & Money (32 answers total)

It's not clear what sort of scenario you're asking about. I don't even know what you mean by "storing" money. Are we talking about a bank of some sort?
posted by jon1270 at 3:48 AM on August 25, 2010

They have assets like real estate and stock, and accountants/attorneys who manage everything for them. It's not like you can just guess their ameritrade password or something, it would require a face to face meeting or at least a phone call with all their various managers.
posted by Rhomboid at 3:50 AM on August 25, 2010

Response by poster: It's not clear what sort of scenario you're asking about.

The scenario is that they have money (not assets) and they don't want to lose it. So a bank account.

It's not like you can just guess their ameritrade password

No you wouldn't need to. You'd grab it from their saved passwords, recover it using a weak "forgotten password" answer, plant a trojan, social engineer a new password, etc. etc.

The question is: how is this preventable?
posted by devnull at 3:54 AM on August 25, 2010

You can't guess their ameritrade password because they don't use ameritrade or any other online trading service, they have a personal financial manager that takes care of their portfolio who they call or meet with.
posted by Rhomboid at 3:59 AM on August 25, 2010

For the small fish, standard security precautions plus legal protection work well enough.

Big money doesn't move around that easily. Once you get into BIGNUM territory, you get a lot more human oversight and/or personal trust in your banking.
posted by Dr Dracator at 4:00 AM on August 25, 2010

Response by poster: they have a personal financial manager that takes care of their portfolio who they call or meet with.

Which is vulnerable to threats: "Go in there and tell your financial manager to do X or else I'll do Y to Z."
posted by devnull at 4:02 AM on August 25, 2010

Yeah, and after that, what? You expect them to come out with a pile of cash 20 minutes later? It doesn't work like that. Assets can't always be liquidated instantaneously, and even if they can the attacker would have to provide some kind of identifying information that the police would be able to use to track them down after they left.
posted by Rhomboid at 4:06 AM on August 25, 2010

So you're asking about kidnapping? Hostage situations? Blackmail? These are not so easy to get away with.
posted by jon1270 at 4:07 AM on August 25, 2010

Response by poster: You expect them to come out with a pile of cash 20 minutes later?

No a bank transfer.

These are not so easy to get away with.

So is this the answer? Because it's not easy to get away with, it's a situation which is not important enough to worry about?
posted by devnull at 4:09 AM on August 25, 2010 [1 favorite]

Which is vulnerable to threats: "Go in there and tell your financial manager to do X or else I'll do Y to Z."

I think you are overlooking the obvious rich bastard protection procedures, i.e. hired thugs, trained attack dogs, impregnable fortresses and the like. You might occasionally need to hire Bruce Willis / Mel Gibson ( I forget ) to get your kidnapped offspring back, but such is the life of the filthy rich.

No a bank transfer

I'm guessing banking law has procedures in place to reverse such transactions, provided you can prove they were performed under duress.
posted by Dr Dracator at 4:13 AM on August 25, 2010 [1 favorite]

Kidnapping has harsh penalties and is treated very seriously by the FBI, and it tends to be pretty hard to get away with the handover of cash when you have the full force of a ton of federal agents working the case. And again, you can't always liquidate assets on a whim -- for example selling a home/estate could take years, and selling a significant interest in a part of a company requires finding an interested buyer and clearing it with the board of directors, etc.

I think it's safe to say that most people rich and poor don't worry about kidnapping for ransom in this country because it's just so rare -- it's a whole other ballgame when traveling of course.
posted by Rhomboid at 4:17 AM on August 25, 2010 [1 favorite]

As long as there is an electronic trail leading away from the money, the police will be able to trace it. Someone is going to have to get it out of a bank at some point to turn it into (practically untraceable cash) otherwise the transfer will just be reversed by the receiving bank.

I know some fairly rich people (up to 100s of millions, but no billionaires) and this is not something that they worry about much. The ones living in Europe and the US don't have bodyguards either, though all of my wealthy friends in Africa do.
posted by atrazine at 4:45 AM on August 25, 2010

The money is invested and relatively illiquid. The bank account with cash is accessible with an ATM. I assume that they just have a regular deposit from an IRA account to refill it that is controlled by a professional. The main checking account is protected by a withdrawal limit just like you and me.

Kidnapping? Why would you do that? In this country, the people with the wherewithal to pull that deal large amounts of drugs and have no need to engage in crazy movie bank heists. More profitable and easier. Only revolutionaries who refuse to sell drugs need to do that and we don't have any equivalent of the IRA.
posted by Ironmouth at 5:22 AM on August 25, 2010 [2 favorites]

Because it's not easy to get away with, it's a situation which is not important enough to worry about?
I suspect that in countries like the US, the risk of extortion is rarely worth the reward - I'd imagine it would require organizing several people (some brains, some muscle), none of which could ever crack, and an intimate knowledge of both their target and how to get untraceable bank deposits. It would also probably require leaving the US (or whatever country) to receive the money and staying in a country that doesn't allow extradiction. I believe the scenario you're thinking of is more common in countries such as Colombia, where kidnapping is a real possibility. The rich deal with the risk by ostentatious security displays - fashionable bullet proof jackets and extensive security forces.
posted by fermezporte at 5:27 AM on August 25, 2010

The way rich people in the US tend to lose money seems to be via confidence schemes more than anything else: it is too dangerous and too difficult to try almost any of the romantic "Ocean's Eleven"/train robbery/kidnap for ransom stuff with people who don't take risks like chucking a bunch of bags of money in a vault in one place. Which normal law-abiding rich people don't, because it is both inefficient and a pain (and risky.)

Now, if you want to know how drug smugglers and other criminals (who have limited access to modern banking and investment services due to the whole "don't be Al Capone" thing,) I think you're looking at complicated alliance structures, laundering money through cash-rich businesses, and lots of semi-automatic weapons. At least, that's what all of those MSNBC specials would seem to suggest.
posted by SMPA at 5:27 AM on August 25, 2010

Best answer: Because unless you count the bank robber who gets picked up by the cops one block away from the bank as a successful thief, stealing non-trivial amounts of money from rich individuals is very, very difficult.

Most rich people's "money" isn't actually recognizably money at all. Ironmouth is right: it's invested in securities or other assets, and it's illiquid, meaning converting it to cash is a non-trivial transaction.

Your average American millionaire probably only has ten or twenty grand in ready-to-hand cash, and the vast majority of that is going to be in an insured deposit account with a commercial bank. Even if the bank does get robbed--and bank robbery is a federal offense, so it's a really low-odds proposition--no individual depositor is going to feel the loss. The bank is insured, and their customers frequently don't even know that anything has happened.

But stocks, bonds, money markets, etc. which make up the vast majority of personal wealth in modern society, are really hard to steal because they leave an unavoidable paper trail. The only financial instrument which doesn't leave such a trail, the bearer bond, has been outlawed for precisely that reason.* I mean, sure, you can hack someone's Ameritrade account, but what are you going to do? Wire yourself the money? Even if you could get yourself through the verification steps needed to confirm such a transaction, the cops'll be on your ass before you can turn around. No explicit protection measures are needed, because doing something like that has an almost zero percent chance of succeeding for more than about fifteen minutes. The end result is that you go to jail and the potential victim is inconvenienced.

The other major component of personal wealth is real estate, and, well, you can't just stuff a house down your pants and unload it at a pawn shop.

No, large scale theft only really works on portable, liquid objects which are not easily to trace but are easy to fence. Most people's assets fall into neither category.

*There are apparently some outstanding bearer bonds still in circulation, but no new ones have been issued for almost thirty years.
posted by valkyryn at 5:45 AM on August 25, 2010 [4 favorites]

I believe there is a part of Sukhetu Mehta's Maximum City: Bombay Lost and Found where he talks about how organized crime type elements in South Asia and within the related diaspora use extortion and blackmail, often preying on the social creme de la creme of contemporary Indian society. I believe it's basically a form of protection racket - give us $X or we will send thugs to fuck your shit up real bad.

That said, I'm not sure how true any of what Mehta writes is*, or how relevant - is this something that happened once, or something that is a real risk for all Indians of means? Was this happening a lot 10-15 years ago, or is it an everyday fear of all wealthy South Asians as I type this?

*I have reason to believe that Maximum City has a high proportion of semi-fictional bullshit.
posted by Sara C. at 5:48 AM on August 25, 2010

It's not clear where you are coming from with this question. Specifically, what do you mean by 'safeguard'? The very wealthy people I know and/or have met (and I don't think I know any in the 100 millions range like atrazine) are as susceptible to all the scam/confidence and ID thefts as anyone else (in North America/Europe) and succumb to them as often as 'not' rich people. I did know a guy once whose inheritance was stolen by a financial manager, and come to think of it, that happened to Neil Simon and something similar happened to Willie Nelson, too. Think also of Bernie Madoff's victims - some of them were really wealthy.

Largely they 'safeguard' their money as you would. Put it in a bank/ in real estate holdings/ in bonds and maybe stocks. Have an 'allowance' moved to a checking account every month. Have a good money manager working for you. Work hard, be conscientious.
posted by From Bklyn at 5:52 AM on August 25, 2010

That financial advisor also wants to keep as much of your money under his or her control, because they will make more income that way. So if you come in and try to withdraw a few million, that's going to look awfully suspicious, and he will have good reason to fight you on it.
posted by smackfu at 5:53 AM on August 25, 2010

Best answer: First, money in banks in the US is insured up to the FDIC threshhold.

Second, fraud, duress, kidnapping, blackmail, et al, are all punishable by law. Many of these types of crimes are pretty easy to track, either electronically or because they require a personal contact of some sort.

Third, banks that work with extremely rich customers have a HUUUUUGE incentive to prevent these kinds of things. I worked at a private bank (banking for the very rich) in college and even though I had absolutely zero access to any accounts or customer information and my computer was on a different physical network than the ones that could access accounts or customer information (no wifi, everything wired at that time), everything my fingers did at my computer was video recorded by a camera in the ceiling trained on my keyboard. There were also tracking programs in the computer, as well as all your typical firewalls and whatnot. I wasn't directly involved with the banking, but we had armed guards at the entrance and a very controlled entrance, some plainclothes guys around the banking floor. Each customer had a personal banker and our bankers knew their customers by sight. We did not allow random-ass strangers to approach the banking area with clients. If an old dude had a nurse helping him, she could help him sit down but then she'd have to go wait outside until called; meanwhile, the banker and old dude were speaking privately. Bankers all had panic buttons. We had lawyers with expertise in mental competency and duress issues who were there at all times. (In fact, many of the bankers were lawyers.) A client could easily come in and say, "Look, there's a guy who threatened me and said if I don't transfer Y to Z, he'll kill my family." The cops would be there SO SUPER FAST your head would spin. A client could come in and say, "I'm so in love with my nurse I want to give her a million dollars!" and they'd have the duress guys out to investigate.

(Thinking back to the cases of in-person fraud I've seen against the wealthy, I'd say a majority of them actually involve the lawyer or money manager skimming funds or running a confidence game. Family members and outsiders who try to do so mostly get caught pretty quickly by alert lawyers and money managers.)

Fourth, in terms of bank transfers, large ones are flagged and take time to clear.

But really, in the time I was there, there weren't any meat-space duress or fraud issues; the U.S. is really a pretty safe country and, I gotta tell you, most of these guys (they were mostly guys) you wouldn't known were rich by looking at them, and rich people tend to live in wealthy areas where most of the other people they know are pretty rich too. And while there were various cyberattacks, none of them were adequate to overcome the bank's safeguards, and the bank itself was insured, at least to an extent, against these sorts of attacks and losses.
posted by Eyebrows McGee at 5:56 AM on August 25, 2010 [13 favorites]

The way rich people (in the US, at least) lose their money seems not to be via threats from thugs or stolen passwords, but via guys like Bernie Madoff. It's not the outsiders they have to worry about; it's the insiders - the guys they trust - who manage their money.
posted by rtha at 6:22 AM on August 25, 2010 [2 favorites]

Best answer: I have talked about the money safeguarding issue with the drug dealers I work with in the criminal justice system and it's precisely their lack of wealth and access to the systems noted here so far that make them extremely vulnerable to robbery which has given rise to an entire illigitimate career path of its own as the guy who doesn't deal drugs but robs dealers (the Omar character). There's a threshold that drug dealers cross over if they manage to grow their operation and not get caught where they can begin to afford the resources to pay shady attorneys and accounts to help them launder money, but your average kid on the corner (who still makes a considerable amount of cash) has no idea how to launder money or who to contact to find out how. So, they wind up sitting on sizeable amounts of cash; the kids in my program estimate that your average corner hustler is bringing in anywhere from $35,000 at the low end to $60,000 for dudes a little higher up in the heirarchy per year. That's tax free, all paper money. Where do you put it?

The kids tell us that the average huslter's house is like an Easter egg hunt of taped up cash stacks; they have it taped to the back of the dresser, taped up under the bed, in the kitchen cabinets, three shoe boxes full buried in various spots around the property. If a crew of dudes rolls in and sticks a gun in your mouth, you will be faced with the prospect of either dying (likely after being tortured), or giving up your money, though giving up your money may put you out of the game permanently because word is out on the streets now that you're weak, and if you gave up your money to the stick up guys, you might give up names to the police.

Anyway, because of the way the black market is set up there is tremendous pressure on the kids to spend the money as quickly as they get it in order to tie it up in other assets that are easier to protect, much the way wealthy people do with other investments. Obviously, expensive jeans, Iphones, tricked out luxury SUVs, flat screens, lavish nights at the club aren't investments, but they are ways to spread the money out such that it's not sitting in one big bundle in your bedroom. Someone can steal your car, but they're not going to also get your TV and your Rolex. Someone might get you for your jewelry, but you've still got a $60,000 car at home. It's not a great strategy, but considering the lack of access to means to make the money usable as anything other than paper cash, it's not totally stupid, eiter. Most of the kids, by the time they get to us, having caught charges, been tied up in the system and off the corner for a while, have nothing left in terms of savings to show for their time hustling, they've blown it all.
posted by The Straightener at 6:22 AM on August 25, 2010 [26 favorites]

The strongest defense for large quantities of money is trusting the system and playing the odds. The possibility of any one person being "rich" by your standard is pretty low. The probability of anyone who is either intelligent, resourceful, or desperate enough to risk robbing said individual actually attempting such an act is even lower. If I go up to Warren Buffett and attempt to coerce him... well, how often is he alone? How likely is it that I'd be able to break into his house and get either a stash of paper money or the information to get to his bank accounts? In the really unlikely possibility I get him to transfer money to my bank account in some exotic locale, how likely is it that I'm going to get away and get access to that money without someone noticing the transfer and cancelling it?

I'd say that this is so incredibly unlikely that you're trying to protect against scenarios that are really just flights of fancy. I ask you to show me the reverse situation: What is one example of a US citizen with a lot of wealth being robbed or coerced that resulted in a loss of a large amount of money? I can really only think of Bernie Madoff-style situations.
posted by mikeh at 7:01 AM on August 25, 2010 [1 favorite]

My wife worked with property insurance for extremely wealthy individuals, which is another important component. Determining premiums they look for a variety of physical safeguards for your fleet of luxury cars / boats / rare art, but from the perspective of the wealthy person these things are "guarded" mostly by insurance companies and the law.
posted by a robot made out of meat at 7:03 AM on August 25, 2010

For the record: The FDIC doesn't insure banks against robbery, it insures them against liquidity crises, i.e. a run on the bank or other insolvency. Banks have private property and casualty insurance to protect them against theft, and a number of insurance carriers make a pretty penny selling it to them.
posted by valkyryn at 8:05 AM on August 25, 2010

Let me put it another way. I'm a lawyer who is currently suing the personal representative of an estate for embezzling $50,000, and then using a power of attorney to embezzle another $100,000.

She made withdrawals from an account she was authorized to access and then used the funds for her own purpose. The only way large sums of money get stolen is when people with authorized access take it and "convert" it to their own use.

There is simply no way a person can take very much money at all without some sort of legal access in the first place.

Anyway, there's a warrant out for this woman's arrest and its only a matter of time.
posted by Ironmouth at 9:06 AM on August 25, 2010 [1 favorite]

Put another way, if a bank allowed their security to be compromised and the money of rich persons to be taken away, they would likely be negligent in safeguarding the money. So the rich person could sue them.

And any large enough transfer would take time to clear and the person showing up at the bank to collect would not walk more than three steps from the counter.
posted by Ironmouth at 9:11 AM on August 25, 2010

It looks like author Naomi Wolf did not keep track of her bank balance, did not keep track of her debit cards and checks, kept more than 100,000 in one account, and had a dishonest assistant. That is what she is claiming in a lawsuit against the bank saying she lost $300,000 because the bank allowed the money to be withdrawn, probably bit by bit.

You shouldn't have more than $100,000 in one bank account because it won't be insured but also because if someone steals your account information they can only get $100,000. But some rich people keep too much money in one account and are lax about keeping access to it safe.

Scenario: you give your secretary a debit card to use one time to buy flowers for a business client's funeral. The bank account has $300 in it so you don't even consider that it is at risk and you don't even think about asking for the card back. Maybe even thinking you will use that account for funeral flowers again in the future. Then, over time, you deposit tons of cash into that account, forget that you gave the secretary the debit card, and are too lazy to break up the cash into separate bank accounts or invest it. 5 years later when you remember it exists and you check it the money is gone.
posted by cda at 9:28 AM on August 25, 2010

Here's a scenario that will help answer your question.

Let's say Joe Rich Guy gets mugged, Hollywood movie style, where a thief forces him to transfer his wealth from his bank account into some super secret bank account, leaving him penniless (and the thief becomes wealthy). Let's forget about the electronic paper trail for a moment and just assume this happened and the thief, like, totally got away with it and stuff :)

Ask yourself: how much money would the first bank lose when all of their wealthy clients move their assets elsewhere due to safety concerns? The answer is: All Of It. This isn't any different than you looking for an apartment to rent. Let's say you saw a nice place today and you're thinking about renting it. Then, on the news, you see that someone was gunned down today on what would be your new doorstep. Are you going to rent there? Heck no! The place isn't safe.

This is why Joe Rich Guy is more likely to be robbed by someone like Bernie Madoff than by violence, forgery, impersonation and computer tricks. Without safety and security, there would be no financial industry.
posted by 2oh1 at 10:08 AM on August 25, 2010

P.S. In Mexico, on the other hand... yikes! It's less an issue of banking and investment security than it is an issue of personal security. The kidnapping situation down there is horrifying.
posted by 2oh1 at 10:14 AM on August 25, 2010

Just as a data point, some guy posted about being a lottery multi-millionaire on another site; when asked how he takes care of his money, he said he had a team of accountants looking after it, and a second team of accountants checking on the first team without their knowledge.
posted by AmbroseChapel at 3:24 PM on August 25, 2010

Having recently had to move a lot of money around due to a divorce, I can assure you that you can't simply log on to your bank website and transfer out tens of thousands of dollars in one go. If you stopped paying attention to your accounts for a long time maybe they could drain them slowly, but LARGE transfers require you to go to the bank.
posted by wildcrdj at 4:12 PM on August 25, 2010