How to prevent wire transfer fraud

Wire transfers can be a very quick and convenient way to send money, especially for those sending large sums in the real estate, professional services, and financial sectors. However, these large sums present the possibility of rich rewards for criminals, making wire transfers particularly vulnerable to certain types of fraud. According to a 2023 report from Verafin, the value and occurrence of wire fraud increased steadily from 2021 to 2022, with the median value rising by 17% between Q4 2021 and Q4 2022. As with any type of fraud, the best defense is to be vigilant and to proactively implement simple and effective fraud-fighting strategies. In this article, we explain what wire transfer fraud is, give some examples of wire fraud in action, alongside our top tips for how to avoid falling victim to it. What is a wire transfer? A wire transfer is an electronic method of transferring money from one business or individual’s bank account to another via a third party wire transfer service. It is a quick and relatively easy way to send funds. In the US, the Federal Reserve is responsible for the wire network that banks use to conduct wire transfers. This network, known as the Fedwire, facilitates real-time settlement between institutions. Anyone, from consumers and businesses to governments, can initiate a wire transfer from their bank, with domestic transfers usually able to be processed on the same day. What is wire transfer fraud? Firstly, it’s worth remembering that wire transfers are safe as long as correct procedures are followed and adequate security is implemented, and that financial institutions involved in wire transfers are required to obey strict rules and regulations. However, as with any electronic method of payment, hackers will try and take advantage of any weakness they can find. Wire transfer fraud is especially appealing to criminals because it’s quick, it’s hard to trace, and there’s no way to reverse the transaction once it's completed. Wire transfer fraud takes many forms, but it commonly involves the following: Research - fraudsters will conduct online research into potential victims by finding out information from publicly available sources like social media and company websites Phishing - armed with these personal details (which provide a veneer of credibility), they’ll attempt to trick you or someone else at your company into giving away sensitive information by sending phishing emails Hacking - hackers can then use these stolen details to fraudulently gain access to online accounts or emails, from which they can send wire transfer requests to unsuspecting victims Theft and laundering - once the buyer has sent the money, there’s no way to recover the funds, and the criminal can attempt to launder their ill gotten gains by breaking the cash into smaller amounts and sending it on to several other bank accounts Wire fraud examples To be vigilant, you need to understand the many devious ways fraudsters can commit wire fraud. Most wire transfer fraud follows a similar pattern, where the fraudster wins the confidence of the victim by posing as someone familiar to them or someone in a position of authority. Let’s look at some common examples: Real estate scam - real estate transactions are big fish for scammers. Following the steps outlined above, they can gain access to the email account of a representative from a property company. They can then send fraudulent wire transfer instructions to someone who is either buying or refinancing a home. Unless they’re on their guard, the unwitting victim will see that the email is from someone they have perhaps already been communicating with and send the funds without a second thought. From the business perspective, you need to train your staff to be on the lookout for phishing emails. However, you should also explain to buyers that wire transfer is a real risk, and inform them of suspicious signs to look out for in email communications Website imitation - this is a slightly more sophisticated method of wire transfer fraud where the fraudster creates a website that looks like the website of a legitimate company in order to scam visitors into sending money Family or friend imitation - scammers can use publicly available personal details to imitate someone who is a friend or family member of the victim and request money. Often, they will pretend to be in an emergency or a dangerous situation, which both emotionally manipulates the victim and creates a sense of urgency that can override the victim’s critical faculties Romance scam - similar to the above, except that the scammer will devote a lot of time and energy into convincing their victim that they are in a genuine romantic relationship so that they feel an obligation to them when they request financial help How to avoid wire transfer fraud Now you know what wire transfer fraud looks like, let’s explore the best ways to prevent it. Be aware of the risks You and your team should take the time to understand exactly how fraudsters gain your confidence and the tactics they use to scam you into complying with their requests. Even the most vigilant people can be caught off guard by a sophisticated wire transfer fraud attempt. You can train your team using genuine scam emails, so that they know what to look out for. Some companies conduct exercises where they send out fake phishing emails to see how many people comply with the request. Those that do can be given further training on how to spot fraud. Limit information available through public sources This is one of the most proactive steps you can take to trip up fraudsters at the first hurdle. Encourage your team members to keep the personal details they share on their public profiles to an absolute minimum. This will make it a lot harder for criminals to discover exploitable information that they can use as ammunition during a wire transfer fraud attempt. Careful with sharing data over email Anytime you receive a request for information over email, even if it appears to be from a legitimate account, think very carefully about complying with the request. Is there any good reason for the person contacting you to request that information? If you are in any doubt, contact the person via any other medium you can, ideally a phone call, to confirm whether or not they have sent the request. Even better, implement a policy at your company that no wire transfer requests are given or complied with over email. Instead, issue these requests over the phone or in person. Verify each wire transfer Implement a verification process Scammers are wise to the fact that you may try to verify their request. They may even include phone numbers and alternative contact details that will be answered by someone imitating a legitimate customer. They could also include links to fake websites. To get round this you should verify every wire transfer request by using the original contact details you have for a business partner or client that were gathered at the beginning of your relationship. You can then verify the individual by contacting them directly and, if necessary, even asking them security questions that only they would know the answer to. Implement this as a consistent verification process that everyone on the team has to use whenever there’s a wire transfer request. Can a wire transfer fraud be reversed? No, wire transfers cannot be reversed, which is one of the reasons they’re such a compelling prospect for criminals. Sometimes, international wire transfers can be canceled within 30 minutes, though only if the funds haven’t yet left the sender’s account. How Checkout.com can help you avoid wire transfer fraud Checkout.com offers two products that can help you combat wire transfer fraud. Fraud Detection Pro uses a highly effective combination of machine learning and hybrid rules to keep ahead of fraudsters. When it detects suspicious activity, it can flag the transaction or route it for further authentication, while legitimate customers benefit from a more frictionless verification process. We can also help you verify your users with our Identity and Verification service. Integrating video, automation and human reviews, our solution is highly advanced and adapted to all forms of physical and digital counterfeiting.

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Checkout.com

November 10, 2023

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