Protect Yourself and Your Business from Wire Fraud by Brandon Bowers
Wire payments continue to be one the quickest and easiest methods for individuals to send large amounts of money to others anywhere in the world. However, these electronic transfers made through banks or third-party service providers like Western Union can be rife with fraud and legal risks for the parties involved.
Some of the most common uses of wire transfers are to send money to family members in the U.S. or a foreign country, pay vendors for their services, settle real estate purchases or transfer money into investment accounts. The transactions themselves do not involve the actual movement of cash and can be processed within minutes in the U.S. or within days when money is wired overseas. To initiate a transfer, the sender must share sensitive personal data, such as their names, recipients’ names and bank account information, over the phone or via email. Once funds are transferred, they generally cannot be undone, which makes it critical for senders to verify the information they share and confirm that the intended recipient is someone they know and trust. This is where things can get complicated and lead to fraud.
Wire transfers are generally safe, with U.S. banks and wire service providers required to adhere to stringent security measures and anti-money laundering laws. However, criminals and other bad actors have taken advantage of the ease with which wire transfers can occur. They are adept at crafting complex schemes and using email phishing attempts to trick victims into wiring money or requesting victims wire money as a form of payment for bogus internet sales. Scammers also compromise businesses’ email accounts, phone numbers and virtual meeting applications to conduct unauthorized funds transfers, which, according to the FBI’s Internet Crime Report, resulted in more than $2.9 billion in business losses in 2023. Moreover, the courts have found that when a business falls victim to these schemes and remits payment to a scammer rather than the appropriate payee, it is not only unable to recover the erroneous funds transmitted, but it may also be liable for payment to the intended recipient.
Thankfully, there are some ways for businesses to protect themselves from these and similar wire transfer scams. The first step is to recognize the warning signs of potential fraud, which may include unexpected or unsolicited wire transfer requests, especially from people you do not know or someone posing as a government agency. In another common scheme, scammers overpay a business or individual with a fake check that the victims deposit into their bank accounts. However, the check amount is more than the required payment, so the scammer asks the business to wire the difference back to them before the victims can recognize that the initial payment is fake.
In addition, businesses should educate and train their employees on how to spot fraudulent emails and protect their accounts with two-factor authentication. They should also have a policy in place that requires their employees to follow specific procedures and checks and balances before sending or receiving wire payments, such as the following:
- Limit the number of employees who can authorize a wire transfer.
- Verify recipients’ bank account information, including account number and name, against your business’s files and directly with the bank.
- Verify wire transfer requests and required information over the phone with an individual you know at the recipient business and using a trusted phone number you know and use regularly.
- Be cautious of any last-minute changes to wire transfer requests.
- Require two employees to verify any changes to a wire transfer.
- Establish procedures for reporting suspected fraudulent wire transfer requests internally and to law enforcement.
- Consider cyber insurance coverage to help recover losses from fraudulent wire transfers.
About the Author: Brandon Bowers is director of Managed Cyber Security Solutions with Berkowitz Pollack Brant Advisors + CPAs, where he provides businesses, professional services firms and family offices with business continuity and recovery, cybersecurity and fully outsourced help desk services. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or info@bpbcpa.com.
← Previous
